Dear Neighbor,
The House Capital Investment Committee, of which I am a member, has wrapped up a series of tours all across the state to visit sites of proposed bonding projects.
All together, we spent 13 days on the road over the course of five separate trips and made more than 60 stops. These proposals add up to more than $3 billion.
The information we gained on the bonding tours gives us much to think about as we prepare for the 2016 session. I am working hard to understand each proposal so I can weigh its merits and make good decisions as a bill is assembled. Larger bonding bills traditionally are done in even-numbered years, meaning it will be one of the top issues when the next session begins March 8.
From my perspective, I see two key overall decisions which will have to be made, first how much the bonding should total, and secondly which projects then are to be approved.
Determining the amount of bonding is typically done using a percentage of total expected personal income for the state and then applying a factor to arrive at a total amount of all bonds that can be outstanding. Although using that principle is a sound guide, it only takes into account the total amount of debt that can be outstanding. From a sound financial standpoint, it seems to be missing another important test which is to determine “a prudent amount of debt payment relative to the state’s revenue.”
My hope is that we can have a discussion using both the amount of debt outstanding, as is currently done, and also add a test to address the amount needed to service the debt as well. An analogy relative to this as a consumer would be someone who might qualify to spend X dollars to purchase a new home (the mortgage amount they would “qualify for”) but then to be prudent also would consider what they can afford in payments, since even though they could borrow a larger amount they need to ensure the payment is not too high relative to their expected income.
Therefore, whether it is a prudent consumer, or the state of Minnesota, I believe we need to decide on a level of debt which is both not too large as a total dollar amount, and also recognizes the need to have the payment ability while paying it back. This becomes all the more important looking ahead since we cannot leave future generations with an excessive payment obligation they will not be able to afford.
Once the amount of debt to be issued is determined the second, and equally difficult issue to face, is to decide how the available bonding funds will be apportioned. I have previously written how the sheer volume of facilities and infrastructure owned by the state is eye-opening. The bonding committee visited colleges, wastewater plants, rail projects, bridges, museums, prisons, power plants and a whole lot more – yet we really didn't even make a dent in seeing all the infrastructure which exists. It goes without saying, the more new projects the state adds the more the maintenance commitment will be needed in the future, and the more the bar will raise for future tax dollars needed just for maintenance purposes. So the first decision often becomes: Do you fix the leaky roof or replace the building?
Beyond those somewhat “defined by necessity” issues, there are also all the “asks” for new projects, some of which are close to being a necessity. Others which could be considered “nice to have” things, don’t really rise to the priority of a bridge or dam that could fail, yet would allow people to enjoy the environment and amenities the state has to offer. As you can imagine, it will make for very difficult decisions since the current repairs are necessary for safety and use, yet the new projects would also bring quality of life to those who use them. Whatever is decided of course must also take into consideration the future overhead which would then be necessitated by their construction today.
So, when it comes to state bonding, these are the kinds of decisions we will need to make in order to determine where affordability and stewardship meet. It is important to remember that whatever dollar amount the 2016 bonding bill becomes, it will be on top of a smaller, but not insignificant, $173 million bill that was enacted this year – in what was not a bonding year by name.
I welcome your input on this issue as we prepare for the 2016 session since it’s important to know where your priorities may reside as a bonding bill is assembled. And of course in addition to the bonding issues I always invite any ideas you care to share so I can be as effective as possible in representing the people of our district, and the state.
Sincerely,
Rep. Bob Vogel