US States Wasted Billions by Refinancing Debt Early, Study Finds

A popular bond refinancing tactic used by US states and cities likely cost taxpayers “billions of dollars,” according to a paper to be presented July 18 at the Brookings Institution’s 12th annual municipal finance conference.

The study analyzed 14 of the more than 200 so-called advanced refundings in which tax-exempt municipal bonds were refinanced with taxable debt between 2018 and 2020. Those 14 borrowers alone, including the state of California and the New York State Thruway Authority, left about $580 million on the table because they opted to refinance early instead of waiting until the call date when ...