April 8, 2009

PMIB Update

The Pooled Money Investment Board (PMIB) held a special meeting on Monday, April 6, 2009 to discuss the available funding from the $6.5 billion in tax -exempt bonds sold during the week March 24, 2009 The STO plans on issuing approximately $3 billion in taxable bonds the week of April 13 or 20, 2009.

Of the $6.5 billion in proceeds made available by the March 24 bond sale the PMIB approved $541 million in school construction projects administered by Office of Public School Construction.  Staff to the PMIB members stated that the $541 million for school projects was intended to pay for about half of the $1.3 billion in school construction projects that submitted a request for fund release.

After the April bond sale staff stated that there is a “down period” during which the STO historically has not sold bonds. The down period begins in May and ends in late June/early July, coinciding with the Governor’s issuance of the May revise and budget discussions, and this year with the May 19 special election. Projects that are not funded from the proceeds of the March or April 2009 bond sales most likely cannot look forward to receiving funding from bond proceeds until after the next potential bond sales in June or July, 2009.

Staff reported that Department of Finance projects that by July 2009 State borrowing again will near the maximum permitted level and remain at that level until a sizeable cash flow borrowing is completed. Therefore, the PMIB voted to not approve any additional AB 55 loans and to continue with the funding freeze in order to secure sufficient cash flow for the state and preserve Pooled Money Investment Account (PMIA) liquidity.

The State Treasurer stated that staff to the PMIB is working on a plan to reduce reliance on AB 55 loans from the PMIA and to maximize upfront funding with GO and lease revenue bond sale proceeds to avoid the recurrence of having to freeze disbursement of PMIA funds to approved projects. The PMIB members acknowledged that they will have to factor in provisions to avoid violating any arbitrage laws.

The next regularly scheduled PMIB meeting is April 15 at 10:00.