California State Treasurer Eyes Private Bond Sale -- First in State History

The California state treasurer's office confirmed today that it is considering selling state general obligation bonds privately for the first time in state history.

The state is exploring the private sale because its $40 billion budget crisis has forced the cancellation of the normal sale of state bonds. About $3.8 billion has already been frozen in funding for infrastructure projects, resulting in delays or halts to 5,300 infrastructure projects statewide. Today the state controller began delaying payments to "more than a million aged, blind and disabled Californians that go to pay their rent, utilities, or put food on their tables (and) to state agencies that use the payments to fund critical public services, ranging from public safety to health and welfare."

In response to an inquiry from the California Stem Cell Report, Tom Dresslar, a spokesman for the state Treasurer Bill Lockyer (see photo), said,

"We are exploring the possibility of privately placing GO (general obligation) bonds. The purpose would be to get some dollars flowing into infrastructure projects."

He continued,

"It's premature to talk about when any such private placements might occur. All I can say is we're moving with a combination of swiftness and due diligence. It would not be in the State's interest or CIRM's interests to speculate about price.(CIRM is the $3 billion state stem cell agency.)

"As far as we know, the State never has sold GO bonds through a private placement. Our office has informed CIRM we will have no problem with CIRM conducting a private placement, as long as it doesn't compete with any State efforts to issue taxable bonds for other purposes."

On Jan. 16, Lockyer said,

"The bond market is showing signs it may allow California access, despite the State’s worsening cash crisis and its $41 billion budget shortfall. My office is actively exploring options for issuing bonds soon. We’re also exploring other possible arrangements that could help pump more money into projects. But there are no guarantees these efforts will succeed."

CIRM officials began talking publicly about selling state bonds privately early in December because of a shortage of cash at the $3 billion research enterprise, which depends on bonds for its funding.

Last week, CIRM Chairman Robert Klein mentioned that the state was also considering selling the bonds privately.