Is California's Bond Freeze Thawing?


March 31, 2008 - When State Treasurer Bill Lockyer announced early in March that he planned to return California to the general obligation (GO) bond market after a nine month hiatus, organizations all across California affected by the bond freeze anxiously waited to see how the sale would be greeted by investors. Manyof these groups have been hard hit by the state's precipitous action last December suspending hundreds of bond-funded programs and postponing indefintely the payment of invoices already submitted.

We're happy to announce that California's recent return to the market was a stunning success. Here's how the sale unfolded:

  • Lockyer had planned to sell $4 billion in GO bonds over a three day run beginning on Monday, March 23rd. The first two days of the sale were scheduled to accommodate individual investors while the third day targeted institutional investors (mutual funds, money market funds, insurance companies, etc.).

  • By the end of the first day of the sale, Lockyer had sold $2.4 billion to individual investors. This positive trend continued on day two. On Midday Tuesday, Lockyer decided to open the sale to institutional investors and opted to end the sale at the close of business Tuesday, a full day early.

  • After the dust cleared, Lockyer had sold a total of $6.54 billion in GO bonds, far exceeding expectations.

Although the Department of Finance has yet to make a final determination, it's very likely that the extra $2.6 billion that was raised in the sale will be used to begin paying the back invoices for some of the public works projects that have been halted since mid-December.

Lockyer is also exploring a second large GO bond sale towards the end of April, taking advantage of the new "Build America Bonds" (BAB) program created by the federal economic stimulus package.

Unfortunately, environmental organizations around the state can't keep waiting to re-start their projects. That's why organizations across the state are getting together to discuss other funding options and to learn the lates about the ever-evolving situation. For complete details about bond freeze topics, please visit Bond Freeze Impact.

- Thanks to the Planning and Conservation League for material contained in this report.