Bond Commission Meeting Sparks Borrowing Debate
The state Bond Commission approved $510 million in general obligation bonds Friday for a variety of projects, which sparked a debate over whether the state is borrowing too much money.
“We are borrowing at what I would consider an alarming rate, which doesn’t mean that any of these projects are bad,” Sen. L. Scott Frantz, R-Greenwich, told Gov. Dannel P. Malloy. “But it does raise the question about how much can the state sustain going forward.”
Malloy tried to reassure Frantz that his self-imposed bonding cap would be in line with where it was last year without tying it to a specific number. Last year, Malloy said the state wouldn’t borrow more than $1.8 billion.
In 2013, it came within $10 million of the cap after canceling six scheduled meetings, including one in October shortly after Republicans pointed out how close Malloy was to his self-imposed cap.
On Friday, Malloy said he is concerned about what the state did to drive its bonded indebtedness to the point where it is today and his administration has begun to address that by trying to lower different types of long-term debt.
“I look at bonding . . . as really taking care of the gutters,” Malloy said.
He said he thinks they can agree on the need to reduce debt, but he doesn’t necessarily believe that means there has to be a reduction in bonded debt. According to a report released earlier this year by his own budget office, the reduction in the state’s long-term debt by $11.6 billion comes mostly from the restructuring of retiree health benefits as part of the 2011 labor agreement.
“Some folks would like to draw more attention to bonded debt, as opposed to the overall indebtedness. That’s what got us in trouble in the first place,” Malloy told Frantz Friday. “I know prior administrations made promises in contractual agreements that they also agreed not to fund.”
Malloy was referring to the administration of former Republican Gov. M. Jodi Rell, which decided not to fund about $300 million in state employee pension obligations. The decision was made with union cooperation.
“I’ve worked tirelessly, at least my own description, to make sure that those mistakes of the past are not repeated in the future,” Malloy said.
He said he just met with a bond rating agency this week and he’s confident they understand Connecticut is “putting its house in order.”
Some of the $510 million in projects on Friday’s Bond Commission agenda included $31.2 million on capital improvements at the XL Center in Hartford, $57 million to resurface 200 miles of highway, and $3 million for Newtown to help finance ongoing design costs for the new Sandy Hook Elementary School. About $200 million of the bonding approved Friday is for the Connecticut Bioscience Innovation Fund will be distributed through 2022 with about $10 million being distributed in 2014 and $15 million in 2015.
Asked about why the state is spending $31.2 million on the XL Center in Hartford instead of building a new one, Malloy said he’s trying to stretch the life of the building. He said he’s trying to get another 8 to 10 years out of it.
“There’s no way that we could build a replacement facility overnight or quite frankly in the next two years,” Malloy said. “So either we close it and have no functions being run in Hartford, or we put some money into it and stretch its life.”
The state Bond Commission also approved about $16.1 million in manufacturing assistance grants to five companies, including at least one that is considered a “First Five” company.
CareCentrix, the home healthcare company the state helped move from East Hartford to Hartford, will receive $4.7 million. That’s the third payment the Bond Commission approved for the company as part of its $24 million state assistance package.
The company will get a $12 million grant if it retains its current staff of more than 200 jobs for a five-year period, and another $12 million if it adds close to 300 positions.
Rep. Sean Williams, R-Watertown, was the only member of the Bond Commission to vote against the item.
“I voted for the ‘First Five’ at its inception thinking that it would help jump start the economy,” Williams said Friday. “I didn’t know it would become a big corporate welfare program.”
He said he made a mistake voting for the concept, which was the centerpiece of bipartisan legislation approved in October 2011.
“It’s not beneficial to the taxpayers,” Williams said Friday. “And we shouldn’t be funding it.”