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Editorial: Treasurer’s bond sales to residents a good move

Tue., July 12, 2011

Washington Treasurer Jim McIntire is putting a new spin on the “Buy Local” imperative.

On Friday and Monday, his office will give Washington residents first crack at $323.2 million in bonds that will fund several ongoing transportation construction projects. The bonds are one part of a total $741.8 million offering that will be on the auction block next Wednesday.

Bonds are typically sold through underwriters to mostly institutional investors buying tens of millions of dollars worth at a time for their own portfolios. An individual investor may get a sliver if they own a mutual fund that bought some, but their shot at direct ownership is about equal to their odds getting shares of a hot initial public stock offering.

McIntire says Main Street should come first.

A spokesman says McIntire frequently hears Washington residents want the opportunity to keep their investment dollars working where they can see the results. The state also has solid bond ratings from the three major rating agencies despite growing concerns that debt service is eating an increasing share of revenues.

Admittedly, this is “retail” in a sense many Washington residents will not recognize. The bonds will sell for $5,000 apiece. The offering was sliced to make the most attractive maturity dates available to small buyers, but that will discourage many who might have liked to participate.

There’s also the question of how much the bonds will yield, which will be negotiated with lead underwriter J.P. Morgan and set Friday. Bonds not purchased by small investors, who will probably buy only a small fraction of the $323.2 million, will be auctioned next Wednesday.

Whatever the interest rate may be, those interest payments will stay in Washington.

The bonds available to individuals are for transportation construction, just the kind of visual reinforcement McIntire thinks investors look for. Gas tax revenues will be the primary source of repayment, but the state stands behind them with its full faith and credit.

The major snag for Eastern Washington investors is this: Every project that will be funded with this offering is on the West Side. There’s lane and bridge construction in Snohomish County, a new Interstate 5 interchange in Seattle, and HOV lanes in Tacoma. Only the very welcome improvements under way on Snoqualmie Pass qualify as work individuals and businesses east of the Cascade Mountains might consider personally beneficial.

That, says McIntire’s office, is an accident of timing. This particular cycle just did not happen to include any of the money being spent to expand and improve Interstate 90 and overpasses in the Spokane area, nor the glacial north-south freeway project.

Still, McIntire deserves credit for giving Washington investors a direct way to show they think the state is as good an investment as Wall Street has said it is.