Pennsylvania will issue roughly $1.2 billion of general obligation and state appropriation debt in fiscal 2009 after Gov. Edward Rendell signed off on nearly $3 billion of borrowing to be issued over the next three to five years.
The large bonding initiative, which will support transportation and bridge programs, water and sewer infrastructure upgrades, and alternative energy improvements, among other capital projects, will increase the commonwealth’s borrowing slightly in the current fiscal year, which began July 1.
Typically, Pennsylvania borrows around $1 billion annually, but officials are gearing up to increase that amount by $200 million due to the large borrowing package, according to Rick Dreher, director of the bureau of revenue, cash flow, and debt in the Budget and Administration Office.
“We’ve been in the range of $800 million to $1 billion a year on new money GOs for the past couple of years,” Dreher said. “I would anticipate we’d probably be in the $1 billion to $1.2 billion range once we add in the bridge programs.”
Now that lawmakers have passed the borrowing plan, Dreher said the administration anticipates selling $400 million to $500 million of GO debt around November. Pennsylvania typically issues new-money GO bonds on a competitive basis.
Of the roughly $3 billion of borrowing, the state’s Commonwealth Financing Authority will issue $1.3 billion of the approved debt over the next three to five years. The $1.3 billion includes $800 million of bonds for water and sewer infrastructure, dams and flood control projects and another $500 million for alternative energy projects such as solar energy initiatives, green construction projects, pollution control, and wind-energy development.
“The energy and the water and sewer projects will actually be going through the CFA and I would anticipate that they’d probably be back to market in late 2008, early 2009 timeframe,” Dreher said.
The governor proposed borrowing for bridge repair, water and sewer projects, and alternative energy to address many of the state’s infrastructure needs while assisting Pennsylvania residents with higher energy costs.
“This is a first step in addressing these issues. We’re making an unprecedented investment to spur development of advanced energy resources that will offer new options to consumers at a time when gasoline, diesel fuel, electricity and natural gas prices are going through the roof,” Rendell said in a press release.
Along with the alternative energy initiatives, more than 400 deficient bridges will receive $350 million of bond proceeds for repair work and upgrades, yet the governor said the bridge program is just the beginning as Pennsylvania must address needed bridge upgrades that could cost the state more than $11 billion to bring its spans to a state of good repair.
“We still have a long way to go,” Rendell said in the release. “Pennsylvania has more than 6,000 structurally deficient bridges — the most of any state, and the price tag to fix all of those bridges is in excess of $11 billion.”
Along with the $3 billion of borrowing, the governor last week signed into law the state’s $28 billion operating budget for fiscal 2009, roughly 3.8% larger than the fiscal 2008 budget of $27.2 billion. The $28 billion current general fund budget includes $904 million of debt service costs for GO debt as well as $62.4 million of debt service payments on state-appropriation bonds, Dreher said.
Pennsylvania has $8.2 billion of GO debt outstanding.
