WASHINGTON — The Maryland Capital Debt Affordability Committee approved $150 million in additional state bond authority Monday, drawing a fiery protest from the state comptroller.
“This is a complete contradiction of everything we’re being told about the economy,” Comptroller Peter Franchot said after the meeting. “It just shows what’s wrong with government.”
The extra debt authority requested by Gov. Martin O’Malley first appeared on the CDAC calendar Sept. 24, and committee members agreed Sept. 28 to consider the matter Monday. The original notice was not placed on the public hearing schedule, which Maryland Deputy Treasurer Susanne Brogan said was just an error.
“We dropped the ball on putting the notice in the hearing schedule,” Brogan said. “It wasn’t a secret meeting. It just got overlooked.”
The CDAC approved a plan that calls for $150 million of additional bond authority next year. The committee was going to consider a $750 million five-year plan, but State Treasurer Nancy Kopp, who chairs the body, rejected the idea because the CDAC only has one-year statutory authority, she said.
Maryland law does not allow debt to exceed 4% of statewide personal income in a given year, and debt service cannot be greater than 8% of state revenue. Documents presented at the Sept. 24 meeting project that total debt under the proposal will not go higher than 3.45% of income at any time over the next decade, while debt service will not exceed 7.62%.
“It still falls within the criteria,” said Brogan.
The projections assume annual personal income growth between 3.32% and more than 5% until 2022. The state did see a 4.44% average increase from 2001 to 2010, though it suffered a sharp downturn with a 1.79% decrease in 2009. The projections assume annual revenue increases of around 4%.
O’Malley’s office presented the idea as an opportunity for the unanimously AAA-rated state to take advantage of low interest rates and stimulate the state economy by allowing more municipal projects to get off the ground, Brogan said.
Franchot voiced passionate opposition to the plan, calling the addition of extra debt capacity “seat-of-the-pants,” “casual,” and “a back-door tax increase.”
Franchot, who oversees bond sales along with Kopp and O’Malley on the three-member State Board of Public Works, warned that the addition of extra debt of that size could drive up Marylanders’ tax rates in coming years. He said the increase was offered up by the budget secretary with no detailed analysis or list of projects that would benefit. Franchot said that he is a Democrat, like O’Malley, but couldn’t support the move.
“It’s pretty embarrassing for the state of Maryland,” he said. “We have painted ourselves in a corner.”