Dec 12, 2007: State Treasurer Issues $350 Million Tax and Revenue Anticipation Notes Transaction will generate $1.99 million in revenue for st

SANTA FE – New Mexico State Treasurer James B. Lewis finalized today the issuance of $350 million in Tax and Revenue Anticipation Notes (TRANs). Treasurer Lewis accomplished the sale of the Series 2007A TRANs through a competitive online auction held December 4, 2007.

“The state had a successful sale, receiving 88 bids from 13 different bidders interested in investing in the notes from the state,” Treasurer Lewis said. “This transaction will generate net earnings for the state of $1.99 million. Borrowing low interest money through the issuance of tax-exempt notes and reinvesting the proceeds at a higher interest rate has generated significant additional revenue for the state over time.”

The sale of the Tax and Revenue Anticipation Notes is a mechanism authorized by the U.S. Internal Revenue Service and state law that provides the state with working capital for the general fund, the state’s main operating account. This temporary capital infusion bridges revenue for monthly general fund expenditure allotments and reduces reliance on inter-fund borrowing, which is required as a result of the structural timing of revenue coming into the general fund.

The IRS allows states to issue tax-exempt notes and invest the proceeds without yield restriction to provide the state with a short-term investment opportunity. For this issuance, the state borrowed the short-term money at the rate of 3.04704%. The proceeds from the sale were reinvested at 4.07275%. The TRANs will be payable solely out of the anticipated unrestricted general fund revenues and are not general obligations of the state.]

Since the inception of the TRANs program in 1997, the state treasurer generally has issued each fiscal year a series of TRANs in July and a series in December. A total of $750 million in TRANs has been issued for fiscal year 2008. The notes have a maturity date of June 30, 2008. The TRANs are the state’s largest debt instrument issued each fiscal year. The TRANs have yielded approximately $65 million for the state since the program was initiated.