Bond debate focuses on state building needs

By Bobby Harrison/NEMS Daily Journal Jackson Bureau

JACKSON – The state owns 6,459 buildings. Of those, 1,634 or 25 percent are located on university campuses.
Many of those buildings were paid for by the sale of bonds the state paid off, usually over 20 years.
Those buildings need renovations and repairs, and in the tight fiscal squeeze Mississippi government almost perennially finds itself in, often Legislatures and governors turn to bonds to pay for upkeep.
For only the second time in the past 15 years, the 2012 Legislature could not agree on a bond issue to fund new construction, repair and renovation and other projects, such as the repair of rural bridges.
In the mid-2000s, when the Legislature could not reach agreement in regular session, they did so later in special session.
There was talk after the 2012 session when the House and Senate could not agree on the amount of a bond bill that legislators would come back in special session. That special session never materialized.
For that reason, many, such as Higher Education Commissioner Hank Bounds and Eric Clark, executive director of the state Community College Board, have made bond legislation a priority for the 2013 session, which starts in January.
“These are state buildings and we have a duty and obligation to keep them up,” said Bounds during a recent meeting of the Senate Finance Committee on the issue. “… Every dollar invested (in state buildings for repair) saves three dollars.”
Senate Finance Committee Chair Joey Fillingane, R-Sumrall, said the goal is to have a bond bill during the 2013 session.
“We would love to have a reasonable bond bill next year … But it must be something we can agree on with the House,” he said.
During 2012, bond negotiations broke down when Lt. Gov. Tate Reeves, who presides over the Senate, balked at the size of the bond package proposed by the House.
Gov. Phil Bryant, who earlier this year expressed frustration with the lack of a bond proposal and hinted a special session was possible, said recently in his budget proposal that he would not agree to adding more bonds in 2013 than were being paid off that year. That, in theory, would prevent the state’s bond debt from increasing.
The state’s current bond debt is about $5.1 billion. Treasurer Lynn Fitch is requesting about $388 million in state general funds to pay on that debt for the upcoming fiscal year, plus another $56 million in special funds derived from special taxes or fees levied to support particular agencies.
Through a program set up last term that directs a certain amount of surplus funds at the end of the year to a Capital Expense Fund, Bryant said he hopes the practice of issuing long-term debt for routine upkeep can be curtailed and eventually eliminated.
“It is hard to justify issuing a 20-year bond for roof repairs that only last 15 years,” said Deputy Treasurer Laura Jackson during the Finance hearing.
The problem is that as legislators have grappled with sluggish revenue collections they often have chosen to rely on bonds for what would be considered non-long-term projects or for projects that originally were not set up to be funded through debt.
In the mid-1990s, for instance, the state committed to provide $20 million per year to counties to help repair a large number of substandard rural bridges. For the past nine years, the program has been funded not with cash payments but by issuing bond debt.
Bounds said it is essential universities get help from some source of funds.
“We have a lot of buildings and a lot of square footage that is old and requires a significant amount of rehabilitation,” he said.
Of the 1,634 buildings on university campuses, 35 percent are more than 50 years old. Bounds said the older buildings present specific challenges, such as adapting to access for those who are physically challenged and adhering to regulations for working on historical structures.
According to the Institutions of Higher Learning, the original construction cost of university buildings was $2.46 billion while the replacement costs would be $6.71 billion. For all state-owned buildings, the original construction cost was $5.2 billion while the replacement cost would be $13.5 billion.
During earlier meetings, the Community College Board requested $170 million for capital needs on its 15 campuses and Jackson headquarters. IHL has cited needs totaling $684 million. Those needs include $335 million for repair and renovation and $234 million for new construction – primarily because of growing student enrollment and to expand the University of Mississippi Medical School in Jackson and School of Nursing at the University of Southern Mississippi.
IHL officials have acknowledged that whatever universities receive in 2013 will fall far short of $684 million.
Kevin Upchurch, executive director of the Department of Finance and Administration, presented legislative leaders with a study that placed the state’s capital needs, including universities and community colleges, at $1 billion between fiscal years 2014-17 or an average of $256.4 million per year.
That annual amount would be close to the amount of bond debt that is retired each year, thus coming close to meeting the parameters stated by Bryant of not issuing more debt than is retired.
In several sessions during the past 15 years, the amount of bond debt has been greater because of economic development projects that legislators say pay for themselves through increased tax revenues.
In 2007, for instance, the state passed a $324 million package to lure Toyota to Blue Springs and in 2001 approved $295 million to attract Nissan to Canton.
While those projects might pay for themselves, they still add debt to the state for the 20-year life of the bonds.
bobby.harrison@journalinc.com