The recent sale of $1.2 billion of revenue bonds by the Dormitory Authority of the State of New York (DASNY) was met with good demand, resulting in tighter spreads compared to a previous negotiated deal. According to DASNY spokesperson Jeffrey Gordon, the bond sale was a success and benefited from a calm market and robust demand for highly rated state bonds.
As New York State’s capital project development authority, DASNY plays a crucial role in financing and constructing science, health, and educational institutions that serve the state’s populace. Being one of the largest issuers of tax-exempt bonds in the nation, DASNY’s latest sale showcases the strength and demand for New York state paper.
Howard Cure, director of municipal bond research at Evercore Wealth Management, highlighted the inherent demand for New York State paper due to high tax rates within the state and the presence of wealthy individuals in the retail market. He emphasized that DASNY is considered a strong security in a state that is economically sound, with a high level of demand for its debt.
The authority sold $1.223 billion of tax-exempt state sales tax revenue bonds in three series in the competitive market. The sale included Series 2024A bonds with varying yields and callable options that were purchased by Morgan Stanley, J.P. Morgan, and BofA Securities. The competitive market sale resulted in tighter spreads compared to a previous negotiated deal.
DASNY traditionally issues state sales tax revenue bonds and state personal income tax revenue bonds multiple times per year to finance projects included in the state’s capital plan. The proceeds from the recent sale will reimburse the state for expenditures related to transportation projects and capital plans. The bond issuance reflects New York’s broader financial strategy for supporting state programs.
The DASNY sale was rated Aa1 by Moody’s Ratings and AAA by Kroll Bond Rating Agency, demonstrating the strength and stability of the state’s sales tax revenue bonds. The rating agencies highlighted the importance of the sales tax to New York state’s finances and the structural framework of the sales tax revenue bond program as factors contributing to the high ratings.
While the recent bond issuance was successful, challenges remain, including uncertainty over the MTA’s congestion pricing plan and its impact on the agency’s budget. The indefinite halt of congestion pricing by Governor Kathy Hochul raises concerns about potential future burdens on sales tax and personal income tax revenue sources. Despite these challenges, DASNY continues to manage an outstanding bond portfolio of approximately $55.8 billion.
The success of DASNY’s $1.2 billion revenue bonds sale highlights the continued demand for highly rated state bonds and the strategic role of DASNY in financing essential projects for the state of New York. Despite challenges and uncertainties, the strong performance of the bond sale reflects the stability and resilience of New York state’s financial system.