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State bond proposition tops $453 million, but draws no debate

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Posted: Sunday, October 28, 2012 11:47 pm

FAIRBANKS — It has received next to no attention in Alaska, but the biggest cost on the Nov. 6 state ballot is attached to Bonding Proposition A, at about $15 million per word.

The question is this: “Shall the State of Alaska issue its general obligation bonds in the principal amount of not more than $453,499,200 for the purpose of paying the cost of state transportation projects?”

The bill began with a $350 million plan proposed by the governor, featuring $200 million for the Anchorage port and $110 million for the Port MacKenzie rail extension.

Legislators kept both of those projects in the bill at much smaller amounts—$50 million for the port and $30 million for the rail extension.

They added a couple of dozen other projects across the state, with the goal of getting people from each region to support the package.

The Parnell administration supported the revised version, saying that interest rates are at all-time lows, so this is a good time to borrow money and use the state’s cash elsewhere.

I understand that interest rates are low, but what was missing from the limited public discussions that led to this proposal was any real analysis of the overall state debt load and whether it makes sense to increase it.

And since there has been no campaigning in favor of this plan or against it, we are still not hearing about state debt.

This is a process, it seems to me, in which legislators want to avoid making the giant general fund capital budget even bigger, so they ask Alaskans to borrow the money instead.

The estimated payback is $37 million per year for 20 years, with little thought given to how to pay the bills in the future.

But hundreds of millions of borrowed money can be spent now, which suits the interests of those in power by reducing the general fund budget today.

This helps create an illusion of spending restraint. It is not a defensible financial plan.

The state has about $650 million in current general obligation bond debt. Whether it should push that number above $1 billion is a matter that deserves more thought, especially given the many billions of other debts facing the state, including those to the retirement systems.

Had these projects really been important, the governor and legislators should have paid for them out of the giant capital budget and cut $453 million in other projects.

That would have angered Alaskans who like the items in the capital budget and it would have made life more difficult for legislators, but they took the easy way out and voted to create debt at a time when they should be conserving.

The legislative strategy for a bond issue is based on the idea that if you include some sizable projects from all across the state, each part of the state will vote for the entire package.

There are about $43 million in projects in the Fairbanks area in the package, with the extension of the Old Steese Highway to McGrath Road the most expensive at $24 million, followed by replacement of the Wendell Avenue Bridge at $14.4 million.

Statewide, the most expensive project is $50 million for the Anchorage port work. A report on the port has been completed but will not be released until after the election.

The mishandling of that report may be reason enough to vote against this bond issue, in my view.

There is some information on the bond measure in the voter pamphlet. However, there are no statements in support or opposition of the measure, which is really unfortunate.

The Division of Elections says that state law does not allow the pamphlet to include statements in support or opposition, so it doesn’t include any. That law needs to be revised.

The lack of discussion about the debt level is in keeping with the stealth nature of this measure. No one knows anything about it.

Dermot Cole can be reached at cole@newsminer.com or 459-7530.

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