CHICAGO — Ohio Gov. John Kasich’s proposed two-year spending plan would gut the budget of one of the state’s oldest bond issuers but leave its bond-issuing authority intact.
Kasich has proposed shifting the coal development and research office out of the Ohio Air Quality Development Authority, a move that would slash the agency’s operating budget by 95%, to $923,000 from $20.6 million.
One of the state’s oldest conduit issuers, the OAQDA was established in 1971 to help Ohio meet the standards of the 1970 Clean Air Act.
Since then, it has issued $7.7 billion of tax-exempt bonds to help finance a series of clean energy projects on behalf of borrowers, ranging from big electric utilities — its largest traditional borrowers — to small local businesses.
The coal development office is one of the authority’s largest programs. Shifting it from the OAQDA to the Ohio Department of Development, as proposed by Kasich, will mean the loss of most of the authority’s budget. But its bond-issuing work will likely continue as before, said director Mark Shanahan.
“This should not have any impact on our outstanding bonds or our ability to issue bonds,” Shanahan said. “[Kasich’s] budget is totally focused on one program, and so we’ll be able to do our traditional work without a problem.”
The authority typically enters the market about 12 times a year, selling between $300 million and $700 million annually in both new-money and refunding bonds.
The Public Facilities Commission, not the air quality authority, issues bonds that support coal-development projects, as the debt is general obligations of the state.
The authority’s bond work escaped Kasich’s knife in part because it is fiscally self-supporting, Shanahan said. All salaries and other costs associated with acting as a conduit issuer are paid by fees generated by borrowers who use the OAQDA to enter the tax-exempt market through the agency.
The authority maintains a pool of underwriters and counsel to help finance energy-efficiency projects by state institutions. Its biggest borrowers, like Akron-based First Energy Corp., typically use their own finance teams.
Shanahan added that Kasich’s final budget remains uncertain and could reach into the authority’s bond-issuing operations as well, though it is unlikely.
Lawmakers have already launched hearings on the $55.5 billion, two-year general fund budget that Kasich unveiled last week. Members of the House Committee on Agricultural and Natural Resources will hear testimony Monday from Shanahan on the governor’s proposal.
Shanahan said he has not yet heard why Kasich wants to move the coal development office, and without a good reason, he will suggest lawmakers keep it at the authority.
“We think we’ve done a really good job with it,” he said.
