Massachusetts Governor Urges Infrastructure Maintenance

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BOSTON – Fixes for aging infrastructure is essential for the Massachusetts economy, Gov. Charlie Baker said Wednesday.

"A big part of investing in infrastructure consists of deferred maintenance and modernizing, more than creating new stuff," Baker told about 250 investors during the sixth annual Massachusetts investor conference at the Boston Convention & Exhibition Center. "It makes sense to invest in the stuff we already have."

Baker, a Republican elected in 2014, said 75% of the commonwealth's capital spending is now on deferred maintenance, the rest on new projects. "That's exactly the right ratio and what we should have been doing historically."

Dilapidated equipment has been a major issue the past two years as Baker and the state legislature imposed a fiscal control board to oversee Massachusetts Bay Transportation Authority operations. The MBTA, a unit of the state Department of Transportation, operates Greater Boston's subway and bus lines, and regional commuter rail service. MassDOT projects include bridge and road modernizing.

Upkeep of airport and seaport facilities will also enhance Massachusetts' position in the world economy, he added.

Baker cited expansion plans for the Port of Boston's Conley Terminal, which the Massachusetts Port Authority operates. Conley is New England's only full-service container terminal. The work, he said, would help Massachusetts remain competitive with many East Coast port cities modernizing their facilities to accommodate larger ships.

Massachusetts is also poised for economic growth in cybersecurity and digital health care, said Baker, who plans to visit Israel later this week with roughly 300 "thought leaders," which include executives of startup companies.

"We have a tremendous opportunity to become a global leader and global player," said Baker. "These thought leaders are punching way out of their weight class."

Michael Goodman, executive director of the Public Policy Center at UMass-Dartmouth, said Massachusetts has one of the nation's strongest economies "and is well-equipped to ride out whatever comes next." Challenges, he said, include uncertainty in Washington and international developments including a possible banking crisis in Italy.

State Treasurer Deborah Goldberg said her office will work with Baker and the legislature to manage finances prudently and maintain the commonwealth's high bond ratings.

S&P Global Ratings assigns an AA-plus rating and negative outlook to Massachusetts GOs. Fitch rates them AA-plus rating while assigning a stable outlook, and Moody's Investors Service assigns an equivalent Aa1 and a stable outlook.

"I think that overall, the rating agencies are impressed and comfortable with the attention that every part of state government pays to fiscal discipline," Goldberg said in an interview. "It's understood, and in a lot of states it's not as organized and comprehensive. A significant number of municipalities, too, have enacted fiscal discipline. That overall is unusual for a state."

Goldberg, a Democrat and former chair of the Brookline board of selectmen, said her stridence about protecting an issuer's bond rating traces to her local roots, and her business background. She worked in retail operations, buying and consumer affairs at supermarket chain Stop & Shop, which her family owned.

"Even at the local level – and Brookline is a triple-A rated town – I would always start meetings by saying we would not do anything that would negatively affect the triple-A rating," she said. "How many selectmen say that?"

Goldberg, speaking before lawmakers and state budget director Kristen Lepore on Monday, urged the commonwealth to continue its 10% increase in annual contributions to the state pension fund, as it has the past three years under a pension overhaul law. The contribution schedule is expected to drop to 7%.

Massachusetts reducing its expected pension fund rate of return to 7.5% from 7.75% puts the commonwealth on a par with many states, according to Goldberg. "We are heading into an uncertain economic environment," she said. "We are well-positioned from a risk perspective."

The fund's value on Oct. 31 was $62.2 billion. In the last fiscal year, said Goldberg, the fund earned a return of 2.3%, which placed it within the top 15% of its peers.

She cited timely investment in long-term treasury securities and alternative investments; for example, for fiscal 2016, private equity returned 12.15%, gross of fees, and real estate earned 12.21%, gross of fees.

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