Pennsylvania must delay an anticipated $775 million general obligation bond sale as lawmakers this month failed to move on the state’s $1.68 billion Capital Debt Act, which would authorize the deal.
The legislature will reconvene on Dec. 7. Even if lawmakers approve the act next month, the state may not be able to finish such a large GO bonding before the end of 2009.
Officials anticipate that about two-thirds of the competitive transaction will include taxable Build America Bonds, according to Rick Dreher, director of the bureau of revenue, cash flow, and debt.
“There is no Plan B in terms of other forms of financing, so if the legislature does come back Dec. 7, it probably is too late,” he said.
“Underwriters and investment banks are going to be closing their books at the end of the year. To try to bid an $800 million GO issue — with about two-thirds of it BABs — based on where the market is, there’s no guarantee even if they pass it the week of the 7th that there’s enough time to bid it and close before the end of the calender year,” Dreher said. “And you need more time to market a deal of that size that includes BABs — you need a little bit more time than a straight tax-exempt GO.”
The Capital Debt Act, HB 1418, allows the state to issue up to $1.68 billion of long-term debt in fiscal 2010 to help finance infrastructure projects throughout the state. The legislature will not take up the bond bill until it passes a table games measure.
That legislation would allow racetracks and casinos to offer blackjack, roulette, and poker.
Lawmakers continue to disagree on the tax rate for such gambling and how much operators should pay in licensing fees. The expansion of gaming is expected to generate an additional $200 million for the state in fiscal 2010.
Absent bond proceeds, Dreher said Pennsylvania in about two weeks will run out of capital funds to pay general contractors and reimburse local governments for infrastructure projects already underway.
Major developments include a new convention center in Philadelphia, a new food distribution center in the Port of Philadelphia, four new state prisons, and more than 1,000 redevelopment assistance projects.