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Legislative News and Views - Rep. Dean Urdahl (R)

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Bonding 101

Tuesday, February 16, 2010
Neighbor- In case you missed it, the House passed a $1.2 billion capital investment – AKA bonding – bill Monday night. I voted against the bill simply because it is too large, strays from the essentials and fails to reflect our priorities during these tough economic times. Let’s hope either a conference committee or the governor pare this bill down to a more responsible, affordable amount. I get a lot of questions regarding our bonding bills and there seems to be a fair amount of uncertainty over the whats, hows and whys of this legislation. Here’s a quick overview: The bonding bill is designed to fund projects pertaining to our state infrastructure. These must be publicly owned entities and are usually brick-and-mortar properties of statewide significance. This includes everything from upgrading city sewer systems to working on roads and bridges and constructing new classrooms at public universities. We usually receive hundreds of requests and it is up to the Legislature and the governor to prioritize the projects and decide which ones are approved. There are Capital Investment Committees which travel across the state to take a closer look at many of the proposals. Just like with a credit card, we have debt limits and, in today's economy we have had more borrowing restrictions. Minnesota currently has a strong credit rating so we get rather good interest rates on our borrowing. But, if we borrow too much, the state’s credit rating could be damaged, resulting in higher interest rates. Our bonding bills traditionally are drafted in even-numbered years, the second half of our two-year budget cycles. The Legislature sets the budget in odd-numbered years and then makes the bonding bill one of its top priorities in the even-numbered years. A two-thirds vote is required by each legislative body for a bonding bill to reach the governor’s desk. The governor can approve or deny the bill in its entirety, or he can make selective cuts called line-item vetoes. Those line-item vetoes allow the governor to reduce the total amount of borrowing while approving the remaining projects. The state sells general obligation bonds into the marketplace and the proceeds from the sale of the bonds are used to pay the cost of construction. For more information, you can log on to the Minnesota Management and Budget site: http://www.mmb.state.mn.us/bonds-home/118-118. Sincerely, Dean
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