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More than $18 million in bond proceeds could be canceled

published 1/17/2013
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On Jan. 2 of each odd-numbered year, Minnesota Management & Budget must report to the Legislature the cancellation of General Fund and bond-financed property authorized more than four years prior.

The latest amount is $18.37 million, the House Capital Investment Committee was told.

Kristin Hanson

Assistant Treasury and Debt Management Commissioner Kristin Hanson said that project balances — some as little as 5 cents — will be cancelled July 1 unless reauthorized by the Legislature. The initial report shows $17.74 million to be cancelled, but some incorrect accounting and the finding out of more projects after the new year pushed that number to the actual amount.

“That money is unencumbered, it means it is not under contract — there is no legal contract to say that those funds are going to be used to pay toward that project,” Hanson said.

Balances can exist for a number of reasons, including a project coming in under budget or requirements to access the money cannot be met, such as a non-state match requirement.

For example, money could have been allocated to buy land, but there is not a willing seller, said Rep. Dean Urdahl (R-Grove City). “When the time is up, the bond can be cancelled.”

Rep. Alice Hausman (DFL-St. Paul), the committee chairwoman, said project stakeholders sometimes find themselves in shock to see their project on the list. However, on occasion, projects have been reauthorized in the next capital investment law.

Rep. Matt Dean (R-Dellwood) noted that just because a project is awarded, for example, $1 million in a capital investment law, that money is not available immediately because the bonds must be sold and transferred to the project.

“We do not issue bonds until we have gone through all the appropriate steps to release those monies,” Hanson said. “Oftentimes these projects require a local match, so we at MMB actually have to make sure that they meet that local requirement. … We only issue bonds as the cash flow for the projects is needed.”

“We do normally think that when we cancel we’ve added a little bit to our debt capacity,” Hausman said.

- Mike Cook

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