First Reading: Bonding bill on track for early action

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One of the Legislature’s most important jobs this session could be done quickly – with thousands of Minnesotans benefiting from the rapidity.

A second year of a biennium traditionally focuses on a capital investment, or bonding, law. DFL leaders expect their bill to be on Gov. Tim Pawlenty‘s desk before the calendar turns to March. Such bills traditionally do not pass until April or May.

“There is no secret we want to do this early,” said Rep. Alice Hausman (DFL-St. Paul), chairwoman of the House Capital Investment Finance Division. “If the money is out the door early we can take advantage of the entire construction season.”

House finance division chairs provided their division bonding recommendations to Hausman by Jan. 29, and the bonding bill (HF2700) was introduced Feb. 4, the first day of session. The schedule calls for division approval Feb. 9. After stops in the House Finance and Ways and Means committees, the bill should be ready for floor action Feb. 15.

Hausman has been working with Sen. Keith Langseth (DFL-Glyndon), chairman of the Senate Capital Investment Committee, to have most of the bill agreed to by floor passage. She is optimistic that an expected conference committee to work out final details between the House and Senate bills would take less than a week.

Then Pawlenty would get his say.

Governors have traditionally line-item vetoed projects they deem unworthy of funding at the time; former Gov. Jesse Ventura even used a pig stamp to highlight vetoed projects he considered pork. However, Pawlenty has threatened to veto the entire bill should it not be at a funding level he supports.

Ninety House votes are needed for a veto override. The DFL holds an 87-47 seat advantage.

Rep. Larry Howes (R-Walker), the lead Republican on the House Capital Investment Finance Division, would recommend against a full gubernatorial veto. “You’re just creating a scenario where three Republicans, if they have something that is seriously needed in their district that is in that bill, you’re just pushing their temptation.”

The House bonding bill contains $6.5 million for Minnesota Valley Regional Rail Authority track rehabilitation, $3 million for a rail service improvement program and $2.5 million to replace aging at-grade crossing safety warning devices. (Photo by Tom Olmscheid)A jobs program

Hausman hopes Pawlenty will hear what she has heard from Minnesotans: infrastructure is too important this year. “Why does government invest in infrastructure? It is always with an understanding we’re building a healthy economy.”

For example, she said Winona officials told her that when the size of the city’s port is increased, they can double its tonnage, which trickles down and helps many other area businesses flourish.

Jonathan Zierdt, president and CEO of Greater Mankato Growth Inc., told the House Capital Investment Finance Division Jan. 21 that a $13.9 million request for arena and civic center improvements or expansion in Mankato would immediately create 450 construction and support industry jobs. “It translates into an $84 million economic impact from the project alone. The expansion of the arena will generate about $28 million in new direct expenditures into the marketplace.”

The House bill comes in at $999.8 million in general obligation bonding; the Senate $999.96 million, both far more than the $684.6 million proffered Jan. 15 by Pawlenty

“This proposal is affordable and appropriate,” Pawlenty said.

When factoring in trunk-highway bonds, the one-third match required for higher education projects and other user financing, the governor’s total is $815 million, the House $1.13 billion and the Senate just under $1.1 billion.

Gov. Tim Pawlenty requested nearly $9.86 million in bond proceeds to renovate the Oliver H. Kelley Farm Historic Site in Elk River. The House matched the governor's request, and the Senate bill calls for $500,000 less. Site visitors experience demonstrations of daily farm life in mid-19th-century Minnesota. (Photo by Tom Olmscheid)How much to spend?

State-issued bonds are repaid over the next 20 years. Bond principal and interest costs are included in the state’s general fund operating budget.

The 10-year average of large capital investment laws is $725 million in general obligation bonding. “That is the number that we currently have baked into the (November) forecast for debt service purposes,” said Tom Hanson, commissioner of Minnesota Management and Budget. “The $685 million bill saves $392,000 of debt service in 2011 and $4.7 million in 2012 and 13.”

The 2008 bonding law totaled $717 million in general obligation bonding; the 2006 law, $948.64 million.

DFLers counter that now is the time to have a larger number.

With most projects shovel-ready, they say it would put thousands of Minnesotans to work, especially in the construction industry. Moreover, with low interest rates the state could receive more bang for its buck than if the economy rebounds, and, perhaps, inflation returns. Hausman and Howes have been told by contractors that project bids have been coming in up to one-third lower than anticipated or more.

House Majority Leader Tony Sertich (DFL-Chisholm) added that the bill would leave long-term infrastructure in place to help grow the economy down the road.

However, State Economist Tom Stinson warned that a large bonding bill does not automatically help the economy in the near future.

“It depends on the structure of the projects. It depends upon the timing of the bonding bill, and it depends upon the starting points of the projects that are in it,” he said at the Dec. 2 release of the November forecast. “If you pass a bonding bill at the end of the legislative session, and it’s planning money for projects that are going to start in 2013, that’s going to provide a lot less stimulus to the economy than if you pass a bonding bill at the start of the legislative session and a large amount of it is for repair and renovation, asset preservation that could start in March.” He indicated that a rough formula is every $100,000 equals a one-year job.

Not all Republicans agree with Pawlenty’s vision of fiscal restraint.

“I’ll bet there are things that have to be manufactured for all those construction projects and that’ll help fill in the private sectors manufacturing lines,” Howes said. “I see it as something you don’t want to do all the time, but on occasion it is necessary.”

More than $4 billion was requested in bond money this year, including $1.76 billion from state agencies.

Hausman and members of her division traveled across the state in recent months viewing many of the requests. She admits it is hard to say no, but she must. “It has to be fair to the state. We have to be somewhat balanced and reflect the work and priority of what our divisions have recommended, or, for example, what higher education institutions rank as their priorities.”

Hanson can empathize with Hausman. “These are worthwhile projects, but there is only so much money to go around. We had to prioritize and make selections.”