California delays muni bond sale, awaiting Assembly move

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California Treasurer Bill Lockyer’s plan to sell up to $2 billion of tax-free municipal bonds next week has been postponed by the Assembly’s delay in passing a budget-related bill.

The legislation, which passed the Senate on Monday, would give state finance officials more flexibility in dealing with short-term cash-flow problems, by allowing them to temporarily delay payments to government entities owed money from the general fund. The idea is to keep a bigger cash cushion on hand for money owed to bondholders, whose payments are assured by the state Constitution.

Lockyer believes the legislation could forestall the risk of yet another cut in the state’s credit rating, which already is the lowest of the 50 states. He wanted the cash-flow-management revisions in place before trying to sell new bonds to investors.

The delay in offering the $2 billion in tax-free general obligation bonds will “depend on how fast the Assembly acts on the cash management legislation,” Lockyer’s office said in a statement. At a minimum the bond sale will be put off until the week of March 8. My Times colleagues in Sacramento say the wrangling over the bill appears to involve certain details, as opposed to serious opposition to the concept.

The bond sale would be the state’s first such offering since November, and would be a big test of investor demand for California’s debt as Sacramento struggles to close a $20-billion budget gap. The bonds would finance voter-approved infrastructure projects.

-- Tom Petruno