CHICAGO - Triple-A Missouri would issue its first new money general obligation paper in eight years under Gov. Jay Nixon's proposal to tap $70 million in voter approved bonding authority for water system projects.
Nixon highlighted the need for the borrowing Friday when he announced $1.1 million in small community engineering assistance program grants for water infrastructure projects.
"For many communities, the local water treatment systems are old, and outdated. This puts local streams and waterways at risk of pollution and in turn, puts nearby communities that rely on these resources for drinking and recreation at risk as well," Nixon said.
Nixon wants lawmakers to approve debt service for the borrowing in his proposed fiscal 2016 budget that is now before the Legislature. The budget item would allow the state to sell up to $20 million of GOs for storm water infrastructure projects and $50 million for wastewater pollution projects.
The state is a rare new-money issuer and even more infrequent seller of GOs, which require voter approval. The $70 million authorization is on the books from a previous bond referendum, said Stacy Neal, director of the state's Division of Accounting, which manages state bond issuance.
The state has not sold new-money GOs since 2007 although it has refunded some GOs in recent years with GOs accounting for just $267 million of the $4 billion in outstanding tax supported debt on the books. If lawmakers approve, the state could tap the authorization as soon as this fall, Neal said. The bonds would sell through the state's Board of Fund Commissioners.
"We are excited about the potential opportunity to issue new general obligation bonds for water pollution and stormwater control programs," Neal said. "These have proven to be incredibly successful programs in the past which have helped a lot of Missouri communities, particularly small, rural communities in need of infrastructure upgrades."
The state's forays into the market could become more frequent over the next year or so if Nixon's proposals and others come to fruition.
His proposed budget seeks debt service to support the use of $161 million from bonding authority lawmakers granted last year to fund higher education projects and $192 million to fund state building projects.
That authority would likely be tapped in multiple transactions, Neal said. Missouri will also return to the market around March 2016 to wrap up borrowing for a new mental health prison. The state last year sold $86 million of the $220 million authorized for the project through the Missouri Development Finance Board.
All of that borrowing would carry the state's appropriation pledge.
The financings are on the table as transportation borrowing through the Missouri Highways and Transportation has dried up. Nixon has offered up options including a gasoline tax hike or the use of tolling on one major highway in need of work, but he has not endorsed any specific plan.
Separately, a state appointed task force has proposed a plan to help finance a new, nearly $1 billion stadium for the National Football League's St. Louis Rams to stave off a possible move to California.
The plan relies on $300 million of $350 million of borrowing supported by "extending" existing bonds. Officials have not provided additional detail to clarify whether that means the plan relies on extending the revenues sources in place to repay bonds issued for the existing Rams stadium or reflects the use of some other structure.
Rating agencies last year affirmed Missouri's triple-A ratings but warned they are watching to see how the state deals with income tax cuts and what future action the legislature might take to challenge the governor's budget withholding powers, which were weakened in a voter-approved referendum in November.
The state closed out fiscal 2014 June 30 with revenue collections of about $8 billion, down 1% from the previous year, and slightly below projections, but Standard & Poor's noted that reserves remain fully funded at $557 million.