Bonding plan could lead to fight
Sunday, January 26, 2014
How to pay for building a new Fulton State Hospital is the topic of Wednesday’s 8 a.m. House Budget Committee meeting.
In his State of the State address last week, Gov. Jay Nixon urged lawmakers to approve issuing $198 million in bonds for the project, telling the General Assembly: “Interest rates are low. Our credit rating is high.
“And the need is undeniable.”
But some lawmakers question Nixon’s plan for lawmaker-approved bonds, citing a state Constitutional provision that says: “The general assembly shall have no power to contract or authorize the contracting of any liability of the state, or to issue bonds therefor, except … (3) (it) may also submit a measure containing the amount, purpose and terms of the liability” to the people in a statewide vote.
Veteran Rep. Chris Kelly, D-Columbia, told the News Tribune in an early Saturday e-mail: “I think that since the Constitution sets forth a specific method for borrowing against the general revenue of the state, the rational conclusion must be that other, not mentioned methods are not approved.”
State Senate Appropriations Chairman Kurt Schaefer, R-Columbia, couldn’t be reached Friday to comment on Nixon’s bonding proposal, but told reporters after a Thursday committee hearing the governor’s idea “is extremely troublesome.”
Nixon’s administration last week gave reporters a “partial list” of projects since 1966 that were built with lawmaker-issued bonds that didn’t face a statewide vote.
In Mid-Missouri alone, that list shows seven projects tied to more than $361 million in state-issued bonds, including the Truman State Office Building, Kirkpatrick State Information Center, the (new) Jefferson City Correctional Center in eastern Cole County, the Natural Resources Department’s Lewis & Clark Building and Columbia’s Mizzou Arena.
Last week, state Budget Director Linda Luebbering told reporters the Fulton hospital financing plan didn’t need a statewide vote, “because they are appropriations-backed debt. They do not have the full faith and credit of Missouri taxpayers.
“So, repaying those bonds is contingent on our having an appropriation to pay them.”
And Luebbering’s boss — Office of Administration Commissioner Doug Nelson — told the News Tribune last week that governors of both political parties have used the legislature-issued bonds, without a statewide vote.
“The state has a long history of issuing revenue bonds, appropriation-backed bonds, to finance construction and renovation of state-owned facilities — of which the Fulton State Hospital is a perfect example,” he said.
Nelson said the administration is confident its proposal is backed by a December 1962 state Supreme Court ruling, in a case involving a challenge to the state’s Board of Public Buildings issuing $5 million in revenue bonds to build the Kansas City State Office Building.
The high court ruled then: “We hold that ‘liability’ here, as used in … our Constitution, means, in its true context, a contractual indebtedness, present or future, absolute or contingent, which will be or may be liquidated by general taxation.
“We do not consider that the power to enforce this contract created by the bonds and the resolution, as given to the bondholders, constitutes such an indebtedness.”
Kelly, who is an attorney, disagrees with the Nixon administration’s reliance on the 1962 decision.
“The Supreme Court case deals with Revenue Bonds, but the Governor is touting Appropriation Bonds,” he said in his Saturday e-mail. “It defies logic to suggest that the (Constitution’s) framers would have proposed a citizen vote to encumber general revenue (GR) and then permit a non-citizen approved encumbrance of GR.”
Nelson also noted that each of the previous bond issues was “backed by bond counsel legal opinion that provides the legality of the issuance” of the bonds.
But, Kelly countered: “None of the bond opinions opine on the constitutionality, only on whether the documents are what they say they are.”
State Senate President Pro Tem Tom Dempsey, R-St. Charles, supports the bonding idea.
“There have been occasions where we have done general revenue bonds without going to a vote of the people,” he said last week. “And I think that the state hospital would be a valid use of that type of bonding.”
Nelson said lawmakers and bondholders have nothing to fear.
“We’ve looked back 50 years at various projects that were funded in this manner,” he explained. “Those projects went forward. Those buildings were built.
“And the debt was paid.”
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