SAN FRANCISCO - Transportation projects are in front of the line as California disburses the larger than expected proceeds of last week's general obligation bond sale.
The GO issue, originally targeted for $4 billion, expanded to $6.5 billion amid heavy investor demand.
That will allow state officials to put more money into infrastructure projects that were placed on hold during the government's long-running budget and cash crises.
California didn't sell any GO bonds between June and last week, a period when it would have needed to issue an average of almost $1 billion of GOs monthly to keep up with demands created by voter-approved bond measures, according to a report last year from state Treasurer Bill Lockyer.
That means a lot of projects will continue to wait for funds despite last week's deal, the fourth largest municipal bond sale ever.
It may take a year to clear the backlog, Gov. Arnold Schwarzenegger's finance director, Michael Genest, said this week on a conference call with reporters.
"We have a need that's larger than anything [Lockyer] could possibly sell," Genest said.
Bond proceeds will repay $3.8 billion in loans made by the state's Pooled Money Investment Fund. The fund typically issues loans to bond projects and is reimbursed later from bond proceeds.
Once those loans are repaid, the PMIF plans to release $500 million in new loans. State finance officials announced this week what they planned to do with the unexpected $2.7 billion in proceeds, and transportation projects top the list.
"The major criterion is jobs," Genest said when asked to explain the administration's priorities. "Transportation projects tend to do that, flood control projects tend to do that."
Aside from the pooled money fund repayment, proceeds from the bond sale will provide $1 billion just to pay unpaid bills for projects awaiting reimbursement for completed work. Another $700 million will go to projects that have been or are close to shutdown, primarily transportation and flood control.
The remaining $1 billion or so will go to the entire pool of voter-approved bond programs.
School funding needs diverge widely, said Karen Finn, program budget manager for the Department of Finance. Some schools are seeking grants for projects that have yet to start, she said, while others are seeking grants to pay bills due for projects that are built. The department wants to prioritize schools that have such imminent bills, she said.
Also largely on the outside looking in are affordable housing programs, even after many affordable housing developers aired concerns at recent Pooled Money Investment Board meetings, saying many projects that rely on bond-financed state grants to repay construction loans are facing imminent deadlines.
"Housing bonds tend to be not tax-free bonds," Finn said, meaning proceeds from the recent tax-exempt bond sale can't directly fund those programs. Affordable housing will be able to access the new $500 million loan pool from the PMIC, Finn added.
They should also see relief from the state treasurer's office, which plans a taxable bond sale toward the end of the month.
Lockyer's office has indicated plans to sell at least $1 billion in straight taxable debt, combined with plans to issue taxable debt under the new federal Build America Bonds program that allows an issuer to get a federal subsidy for taxable debt used for projects ordinarily financed with tax-exempt bonds.