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Committee learns about bonding basics

The first year of a legislative biennium is traditionally focused on setting the state budget for the ensuing two fiscal years. However, it is not uncommon for a smaller capital investment package to also become law.

But with no so-called “bonding bill” passed last session, some people, including Gov. Mark Dayton, are calling for a sizable measure to be passed this year. And, they say, the sooner the better.

“I think we should do a bill this year,” Rep. Dean Urdahl (R-Grove City) said Wednesday.

He chairs the House Capital Investment Committee, which received a bonding primer at its first meeting from nonpartisan House staffers and a representative from Minnesota Management and Budget. A January 2015 Information Brief from the nonpartisan House Research Department was referenced at one point.

Dayton proposed a $1.5 billion capital investment package last week. Urdahl said that proposal will have a committee hearing. However, House Speaker Kurt Daudt (R-Crown) said last month he doubts a bonding bill would find the necessary support to pass in 2017. 

To his knowledge, Urdahl indicated he has not heard definitively on what could happen this year, although he threw out possibilities of big bonding bills this year and again in 2018, a small bill each year or a small bill one year and a larger one in the other.

WATCH Full video of Wednesday's House Capital Investment Committee meeting 

Rules for state capital investment spending are outlined in the state constitution, state statutes and federal law.

Jennifer Hassemer, assistant commissioner for debt management at Minnesota Management and Budget, said a project that is bonded for must be for a public purpose, be publicly owned, the purpose of the bonds must be clearly set forth in law and project activities must constitute capital expenditures.

The state follows three capital investment guidelines, including total tax supported principal outstanding is not to be greater than 3.25 percent of total state personal income.

According to MMB, “The maximum debt capacity refers to the amount of additional debt that could be authorized each legislative session without exceeding our debt guidelines. This information can be used to answer the question of how big a bonding bill could be, but does not suggest how big a bonding bill should be.”

According to the November 2016 debt capacity forecast, the state’s maximum new debt authorizations within debt guidelines for Fiscal Year 2017 is $3.45 billion, and $1.75 billion in Fiscal Year 2018. However, the forecast notes those funds “could be allocated among any of the following types of debt: various purpose general obligation bonds, trunk highway general obligation bonds, state general fund appropriation bonds, certificates of participation and real estate and equipment capital leases.”

The forecast assumes an $800 million capital investment bill this year, followed by $800 million bills in subsequent even-numbered legislative sessions and $230 million bills in future odd-numbered years.

Oftentimes an amount is awarded on the condition a non-state match is required. By statute, all financing must be in place to complete the project before a grant is to be made available.

A cancellation report must statutorily be issued every two years regarding capital projects authorized more than four years before January 1 and that have unencumbered balances. The January 2017 report lists nearly $17.54 million that will be cancelled July 1, 2017, unless the Legislature takes further action on those projects.


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