California's $1.8B Bond Sale Creates "Homegrown Economic Stimulus"

This week, California sold $1.8 billion in tax-exempt bonds. Preliminary yields ranged as low as 1.15% on three-year securities. 10-year bonds were priced to yield 3.51%, or 0.34 percentage point more than securities with a comparable maturity in a $2.5 billion sale in September 2011.  30-year bonds were offered at seven basis points more than in September. In addition to the $1.8 billion in tax-exempt bonds, California offered $200 million in taxable debt.

California's Governor Brown called the bond sale a "Homegrown Economic Stimulus," touting the ability of the state to put people to work through infrastructure jobs: 

“When we invest in infrastructure, we provide a homegrown economic stimulus to create jobs and ensure our state is prepared for the challenges of the future,” said Governor Brown. “Investor confidence in California’s fundamental strengths, combined with an on-time, balanced budget, means that we can make important investments to boost the state’s economic recovery and put Californians back to work."

The following summary, taken from the Office of Governor website, shows how certain of the bond proceeds, as well as existing fund balances, are being put to work:

  • California Department of Transportation - Caltrans will be able to start 26 new projects, with a total (multi-year) construction cost of $1.2 billion. The projects, which are expected to create 30,000 jobs, are designed to increase traffic flow by adding lanes, widening roadways and installing traffic management systems.

  • Local Streets and Roads - Approximately $38 million in bond proceeds will be used to start roughly 70 local street and road projects, including mainly general maintenance projects on local roads, such as sealing and resurfacing. Many cities and counties have combined these funds with other local or federal funds to complete larger road projects.

  • K-12 School Construction - Existing funding for K-12 school construction will be fully expended by December 2011. The additional $1 billion provided in the fall 2011 bond sale will fund the start of approximately 450 new projects, which are anticipated to consist of approximately 250 modernization projects, 130 new construction projects and 70 other projects.

  • California Community Colleges - Community Colleges will be able to start five new construction and modernization projects with the $24 million in additional bond proceeds.

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