BRADENTON, Fla. – West Virginia lawmakers approved issuing $1.6 billion of general obligation bonds in a special session Monday.
The senate voted unanimously to approve Senate Bill 3001, while the house passed it 84-4. The bill was signed by Gov. Jim Justice, authorizing the sale of the voter-approved debt in the "Roads to Prosperity" program.
Justice said the state would immediately begin working on issuing the first $800 million of bonds, using the proceeds to build and repair roads across the state and create jobs.
“We’ve got a good feeling going on within this state right now,” he said.
Although the state’s debt burden will increase, Moody's Investors Service said the financing program is credit positive as a key step toward addressing the state’s “significant” backlog of transportation infrastructure repairs and improvements.
“The investments may also help spur economic development,” analyst Genevieve Nolan wrote after West Virginia voters approved the bond program in October.
West Virginia has $1.8 billion of tax-supported debt outstanding, according to Moody’s.
After years of underfunding, Nolan said, West Virginia has the largest backlog of state road and bridge maintenance needs in the nation with the estimated repair costs reaching 49% of general revenues in 2016.
At the behest of Justice earlier this year, the Legislature increased existing transportation-related fees and taxes as part of the fiscal 2018 budget, including a 1% increase in the state’s sales tax on motor vehicles as well as increases on motor fuels and registration fees for passenger cars and trucks.
Those fees are expected to secure the bonds, which will be issued as general obligation debt.
After the $800 million of bonds is issued in the current fiscal year, the legislation authorizes $400 million to be sold in fiscal 2018; $200 million in 2019; and $200 million in 2020.
Any amount not sold in a fiscal year can be carried forward, though it must be issued before July 1, 2021, according to SB 3001.
The governor’s office and the state budget office director didn't respond to requests for information about when the first bond issue would price.
Justice said the bond program is just one of several recent positive developments for the state, where a deteriorating economy and budget problems have led to credit downgrades.
Earlier this year, Moody's cut the state’s GOs to Aa2 from Aa1, citing its multiyear structural budget imbalance.
Last year, budget problems fueled by sliding demand for coal products and high unemployment led S&P Global Ratings to downgrade the state’s GOs to AA-minus from AA. Fitch Ratings had similar concerns in 2016 when it lowered the GOs to AA from AA-plus.
Justice said one positive thing that occurred in West Virginia was its ranking by the personal finance website GOBankingRates.com.
The website on Nov. 27 picked West Virginia as the No. 1 state with the most improving economy in 2017 based on statistics from the Bureau of Economic Analysis.
The ranking was based in part on 6.84% growth in the Mountain State’s gross domestic product from the first quarter of 2016 to the first quarter of 2017. The website also analyzed the state’s declining unemployment rate from March 2016 to March 2017.
“West Virginia ranks as No. 1 most improving because it had so much ground to make up,” the website said. “Its unemployment rate in March 2016 was 6.2%, one of the highest in the country. A year later the unemployment rate was 4.9% - still higher than 37 other states, but the most improved.”
Justice also said there have been some recent economic development announcements, and that he expects another one after a Chinese delegation spent two weeks in West Virginia looking at sites primarily for natural gas and coal facilities.
Justice said no information could be released about the timeline for an announcement about China’s investment, because the parties have signed a confidentiality agreement.