Reduced bond costs will provide immediate savings as universities manage through pandemic
Salem, OR—With the fall school term quickly approaching, this month Oregon Treasury helped eight universities across the state refinance previously issued general obligation bonds at lower interest rates. Refunding these bonds will yield more than $52 million in net present value savings to the universities and another $18 million to the state’s general fund over time.
“The Oregon Treasury team has worked hard to help Oregon universities reduce borrowing costs and secure the lowest-cost financing possible,” said Treasurer Tobias Read. “Colleges and universities are dealing with a lot of uncertainty right now from COVID-19, so anything we can do to help them reduce their expenses is important and timely.”
Issuing bonds helps universities finance projects such as new buildings, renovations and upgrades, and other capital improvements. Refunding bonds, much like refinancing a home mortgage, reduces the cost of those bonds over time. Eight universities participated in the refunding: Eastern Oregon University, Oregon Institute of Technology, Oregon State University, Portland State University, Southern Oregon University, University of Oregon, Western Oregon University, and Oregon Health & Science University.
As the sale date approached, Treasury staff’s early estimates of savings were promising, but the team beat its own expectations based on current bond market conditions and the state’s recently confirmed strong credit ratings and stable outlook. Earlier this year, Oregon Treasury received updated AA+/AA+/Aa1 ratings from, respectively, Standard and Poor’s, Fitch Ratings, and Moody’s Investors Services.
While the universities' savings will be realized over the duration of the bonds, the bulk of the savings will be concentrated over the next fiscal three years; gross savings by university are shown in the chart below. “This is money in the university’s accounts when they need it most,” said Laura Lockwood-McCall, Debt Management Division Director.
The State of Oregon will also get an $18.5 million boost to the general fund thanks to savings in interest costs over time.
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The Oregon State Treasury improves the financial well-being of all Oregonians. We provide low-cost banking, debt management, and investment programs for governments and empower Oregonians to invest in themselves and their loved ones through the Oregon College Savings Plan, Oregon ABLE Savings Plan, and OregonSaves.