Ohio Governor Strickland Announces Successful Tobacco Securitization Bond Sale

10.29.07 - Columbus, Ohio – Ohio Governor Ted Strickland today announced the State of Ohio received net proceeds of $5.05 billion at 8:51 a.m. as a result of the tobacco securitization authorized in the FY 2008-2009 Executive Budget. This was the largest tobacco bond sale in history.

“The goal of our budget was to live within our means and invest in what matters, and a successful tobacco securitization was an important part of achieving that goal,” Strickland said. “The tobacco bond sale allowed us to invest in tax cuts for our seniors and new schools for our children.”

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The tobacco securitization will allow approximately 566,000 additional people to receive the Homestead Tax Exemption. After the expansion of the Homestead Tax Exemption in July nearly 97 percent of the newly-eligible taxpayers took advantage of the expansion during a special sign up period earlier this year.

The newly expanded Homestead Tax Exemption applies to every senior and totally disabled homeowner in the state – approximately one in four Ohio homeowners. The average tax cut is estimated to amount to $400 per year.

The tobacco securitization will allow Ohio to build 250 more schools by October 2010. This investment will also move Ohio from the 40th percentile to the 60th percentile on the school equity list, allowing 438,359 students to attend school in new, state-of-the-art facilities.

Additionally, Ohio’s LEED (Leadership in Energy and Environmental Design Green Building Rating System) schools will jump from one to 251.

“Not only will this sale allow us to help fund tax cuts to Ohioans who deserve it the most and a way to build better schools for the children who will lead our state in the future, but will allow the state to lower its substantial debt burden,” Strickland said. “This creates a more stable financial future for our state by taking on less debt.”

Overall, the tobacco bonds generated $5.46 billion in gross proceeds, with 99.5 percent going towards the Homestead Tax Exemption and School Facilities. The remainder went to underwriting fees and other transaction costs.

The transaction was marketed by a broad underwriting group of 38 firms, led by Bear, Stearns and Citigroup. Firms with a substantial Ohio presence figured largely in the deal, including JPMorgan Chase as co-senior manager and eight Ohio-based firms among the co-managers.

Source: Ohio Governor