12/16/24 - 110 New Stories - REAL Environmental & Conservation Leadership In PA: http://tinyurl.com/3ubmzu7a
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Treasurer McCord Supports $650 Million Bond Issue, Wagner Won't Sign
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Having rejected a proposed $1 billion bond issue, State Treasurer Rob McCord this week agreed to a $650 million General Obligation bond offering that will prevent a potential shutdown of key job-producing capital projects, while saving taxpayers an estimated $36.3 million a year in debt service payments. Auditor General Jack Wagner said in response he will not sign a $650 million bond issue, calling it a bad deal for taxpayers because of its unprecedented size and because it increases Pennsylvania’s debt load during a time of financial peril.
The bond issue can now go ahead because two state officials-- Gov. Rendell and Treasurer McCord-- will sign the offering.
"A billion dollars in debt would not have been appropriate, and I will not approve such an offering," McCord said. "But neither, in my judgment, would it be appropriate to issue zero debt, and in so doing risk a winter shutdown of ongoing infrastructure-improvement projects - job-producing projects that are an important component of our fragile economic recovery."
"Today, after a vigorous internal review and appropriate collaboration with other elected officeholders, I am announcing my decision. It is a solution that will ensure uninterrupted funding into June 2011 for projects that are under-contract and underway," the Treasurer said. "We are authorizing a prudent and proper amount of bond debt for the Commonwealth. It is substantially less - and less costly - than proposed. But it is sufficient to cover the Commonwealth's legal obligations and to keep job-producing projects humming. And, unlike the $1 billion proposal, it is consistent with historic norms for debt issuance during gubernatorial transitions."
Based on his recent conversations with Governor-elect Tom Corbett's transition team, Treasurer McCord believes a $650 million offering also is consistent with the next administration's view of what is best for the Commonwealth at this time.
"No one wants ongoing projects to stop. But we also must be appropriate stewards of the state's resources," McCord said. "This offering is right-sized to address those shared concerns."
McCord said that all parties involved also were concerned about the availability of the Build America Bond Program, a federal program that provides interest rate subsidies slated to expire December 31.
Gov. Rendell proposed in October a $1 billion gubernatorial-transition bond offering. McCord declined to approve it. Such an offering would have been twice as much debt as was issued in the last gubernatorial transition eight years ago, and would have created annual debt-service obligations of $83 million.
"The law and my duty as State Treasurer require me carefully to evaluate these transactions. So does my commitment to Commonwealth taxpayers, who rightly are demanding that public officials carefully consider public spending priorities and debt obligations," McCord said.
"The cash on hand to fund already-approved projects will be depleted by early February. It is important we have cash to continue funding those projects. But there was no need to borrow $1 billion all at once. If we had done that, we would have been sitting on money and paying interest as we did so - losing more money than necessary with what financial executives call 'negative carry.' I would not agree to that."
While the sum is less than the $1-billion in borrowing Gov. Rendell had initially sought, it still remains the largest bond issue ever sought by a lame-duck governor with less than seven weeks left in his term, easily surpassing the $500 million in debt that Gov. Mark Schweiker issued in December 2002.
Auditor General Wagner
With Pennsylvania facing a $4 billion to $5 billion budget deficit next year, now is not the time to increase the state’s debt, said Auditor General Jack Wagner, who noted that this bond issue would increase the Commonwealth’s debt payments by about $46 million a year for the next 20 years.
“Americans hold 8 million fewer credit cards than they did a year ago, because they understand that debt is a bad thing,” Wagner said. “It’s time that state government listened to the public.
“Money devoted to paying off debt is money that is not spent to provide programs and services to seniors, children, families, or veterans, those who government must put first in times of deep economic distress like today,” Wagner said.
NewsClips: Treasurer McCord OKs $650M In State Debt
Editorial: Good Result On State Bond |
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12/13/2010 |
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