Baldacci outlines bond plan

Posted March 10, 2010, at 8:23 p.m.

AUGUSTA, Maine — Gov. John Baldacci announced the details Wednesday of a $79 million bond proposal that includes money to save northern Maine’s last major rail line and to fund transportation projects across the state.

Pitching the bond package as a type of stimulus measure, Baldacci said the additional state borrowing would create or protect thousands of jobs in the state while investing in much-needed highway and infrastructure projects.

“We can’t sit around and wait for the economy to improve,” Baldacci said during a news conference in his office. “We have to do our part, and these projects are sorely needed to put people back to work.”

The package includes $31 million for highway or road projects, $9 million for port or harbor improvements and $17 million for environmental and energy projects.

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The proposal also includes $17 million to purchase roughly 240 miles of rail lines between Millinocket and Madawaska from the Montreal, Maine and Atlantic Railway. The financially troubled railroad is seeking federal approval to abandon the lines later this year.

If approved by the Legislature, the $79 million in bonds will go to the voters this June, joining three other bond proposals already appearing on ballot totaling nearly $69 million.

But first, the Baldacci administration will have to convince some lawmakers — many seated across the political aisle — who are leery of adding to the state’s debt load during a recession.

“It doesn’t reflect the long-range planning regarding how we want to leave the state for the next governor and the next Legislature,” said Rep. Sawin Millet, a Waterford Republican and a member of the budget-writing Appropriations and Financial Affairs Committee.

The governor’s announcement came roughly a week after the Legislature’s Democratic leadership announced a $99 million bond proposal focused on similar initiatives.

It also coincided with mixed news on Maine’s financial situation and the state of the economy.

Tax revenues flowing into the state’s coffers were up slightly over projections, allowing financial officials to trim the estimated budget hole from $438 million to roughly $360 million.

Yet Maine’s unemployment rate inched higher, rising from 8.1 percent in December to 8.2 percent in January, according to preliminary figures released Wednesday. And on Tuesday, one of the country’s major credit rating agencies — Standard and Poor’s — gave Maine a negative outlook based on the state’s budget woes.

S&P changed Maine’s outlook from “AA-stable” to “AA-negative,” a potential first step toward a lower credit rating.

“What it says to the market is there are some problems here and we have concerns,” said Karl Jacob, senior director of S&P’s state and local government group.

“If they are not addressed, the rating could be lowered.”

Jacob stressed that the negative outlook has little to do with Maine’s debt load, which is low compared with other states. Instead, the revision was prompted by the structural financial imbalance contributing to the state’s budget hole and the fact that Maine depleted its reserve, or “Rainy Day Fund,” last year to plug an earlier hole.

But a lower rating could affect the interest rates attached to bonds, increasing the payoff costs.

Currently, Maine receives relatively high marks from both S&P and Moody’s Investors Service for its low debt load, cautious borrowing policies and history of prompt repayment.

According to the State Treasurer’s Office, Maine had roughly $1 billion in tax-supported debt at the end of December 2009. That figure included about $500 million in general obligation bonds — the type proposed by the governor on Wednesday.

To put those figures in context, Maine’s tax-supported debt equaled roughly $743 per person in the state, compared with an average of $865 in tax-supported debt per capita in other states.

S&P ranked Maine 42nd in the nation in tax-supported debt per capita.

Asked about the effects of additional bonds on the state’s rating, Nicole Johnson, an analyst with Moody’s public finance group, said, “It usually takes a pretty significant event to affect a bond rating.”

Unlike other states, Maine does not issue bonds to cover deficits, a practice that can affect bond ratings, Johnson said.

During his midday press conference, Baldacci was asked how his administration plans to pick up some Republican votes. A two-thirds majority is needed to place a bond question on the ballot.

“I know there is a hesitancy in some quarters, but these are projects that need to be done,” Baldacci said. “I think it is responsible and it’s reserved, and I hope to be able to engage them.”

The administration estimates that the bonds will create nearly 1,900 jobs, including 830 among highway crews, nearly 100 to build a new deep-water pier in Portland and more than 300 from energy efficiency initiatives in the manufacturing sector.

Millet, the Waterford Republican, said he does not question the worthiness of the projects. He questions the logic of taking on additional debt less than a year after the Legislature approved $150 million in bonds, much of which have yet to be issued.

“The jobs we want to create are sustained, not one-time and not seasonal,” Millet added. “And I’m not convinced that the state is a job creator through bonding anyway.”