Deal nets state $20 million

Wednesday, June 12, 2002 | 11:25 a.m.

SUN CAPITAL BUREAU

The state is $20 million richer as the result of a complicated financial deal pulled off by state Treasurer Brian Krolicki.

Krolicki told the state Board of Finance Tuesday that the investment firm of Lehman Brothers offered the state the best deal on a one-time payoff for the right to invest some of the state's money. The money will help cover the state's budget deficit of an estimated $240 million.

The finance board approved the plan, in which the state will send Lehman Brothers the revenue it collects from property taxes to finance state and university buildings over the next 20 years.

The firm agreed to pay an interest rate of 6.02 percent per year to the state up front. That amounts to a $20 million windfall for the state, based on estimates of future property tax proceeds.

"No state has ever done this," Krolicki said.

Lehman Brothers will invest the money and keep any profit greater than the 6.02 percent it paid the state. The principal will continue to be used to pay off the state's bonded debt while Lehman Brothers has it in investments.

Gov. Kenny Guinn said the 6.02 percent "seems very good to me." In the past 10 years the state has averaged only 5.8 percent return on its investment, Krolicki said, partly because of limits on where the money can go.

"The investment world doesn't have the same restrictions" as the state, Krolicki said.

The downside is that the state might have been able to make more than the 6.02 percent return on its investments. But it also is protected against any future market downturn, and the immediate $20 million will help the current budget shortage.

The board also approved the sale of $65 million in bonds to finance a number of construction projects, including a new state motor pool in Las Vegas; furnishings for the science building at the West Charleston campus of Community College of Southern Nevada; a telecommunications building at the Cheyenne Campus for CCSN; and an addition and renovation of Wright Hall at the University of Nevada, Las Vegas.