While a new law granting expanded bonding authority to the Connecticut Health and Educational Facilities Authority put Gov. Dannel Malloy and Treasurer Denise Nappier publicly at odds, the state's budget director said allowing the agency to sell University of Connecticut-backed bonds was necessary for UConn's growth, especially in dormitory construction.

"From a policy perspective, it makes sense," Benjamin Barnes, secretary of the Office of Policy and Management, said in an interview Tuesday. "We would like to give UConn better tools to address the dormitory issue."

Malloy on June 15 signed legislation that enables the authority to sell bonds backed by UConn, the state's flagship university.

Previously, Nappier's office sold UConn bonds while the authority issued bonds for the Connecticut State University System and nonprofit private colleges statewide.

The university system consists of Central Connecticut, Eastern Connecticut, Southern Connecticut and Western Connecticut state universities.

The bill also merged the Connecticut Higher Education Supplemental Loan Authority into CHEFA.

"One area in particular where UConn needs to grow is dormitory construction. There has not been a lot of it," Barnes said. "The university has a lot of pent-up demand, not only at the main campus in Storrs but also at the other campuses, such as Waterbury and Stamford. Stamford, where the housing market is very tight, is one great example."

Nappier, while favoring the CHESLA-CHEFA merger, strongly opposed allowing CHEFA to sell UConn bonds.

In a newspaper op-ed, the treasurer said the agency's administrative fees would trigger higher bonding costs while merely duplicating a bonding process in place for 17 years.

"Based on comparisons we have done, this new duplicate process could result in additional expenses of over $8 million on a typical $200 million financing," said Nappier, who added that broadening the agency's powers "is unnecessary, costly and may confuse investors and undermine their confidence in existing UConn 2000 bonds."

UConn 2000, which originated in 1996, has expanded into a 23-year, $2.5 billion program scheduled to run through 2018. The treasurer's office has issued nearly $1.9 billion of new-money bonds since 1996 to sustain the program.

Nappier, a former Hartford city treasurer, is serving her fourth term as state treasurer.

"While we disagreed with the treasurer about the underlying policy, we certainly agree that Connecticut needs to prudently manage its portfolio of debt," Barnes said.

Fitch Ratings, Standard & Poor's and Kroll Bond Ratings rate Connecticut's GO bonds AA, while Moody's Investors Service lowered its rating to Aa3 in January.

Formed in 1965, CHEFA now has more than $7.6 billion of bonds outstanding, according to its website.

It also serves hospitals, childcare providers, cultural institutions and human service providers.

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