It’s good news that Gov. Paul LePage may consider restarting a program that makes it more cost effective for nonprofits to borrow for their capital projects. After returning from a trip to China to potentially attract businesses to Maine, perhaps he will see the economic sense in making it slightly easier for universities and hospitals to fund major projects and the construction jobs that come with them.
Three years have passed since the governor and Bruce Poliquin, former state treasurer now running for Maine’s 2nd District seat in Congress, effectively shut down the longtime pool loan program at the Maine Health and Higher Educational Facilities Authority. Under federal law, educational and health care nonprofits must go through the quasi-state agency to sell tax-exempt bonds.
The agency — overseen by a governor-appointed board but not funded with tax dollars — groups together the loan amounts of multiple borrowers to enhance their credit strength.
That allows the authority to issue bonds with far lower interest rates than individual nonprofits could secure if they went it alone. The process has saved nonprofits millions of dollars in interest over time. The borrowers — the educational and health care facilities — are responsible for paying the bonds back.
But in 2011, LePage refused to sign a pool loan package, meaning the borrowers at the time — including Husson University, Fryeburg Academy, Colby College, York Hospital, Inland Hospital in Waterville and Franklin Memorial Hospital in Farmington — couldn’t issue bonds together through the agency for projects they had already planned.
LePage and Poliquin said at the time that no bond packages would be signed unless residents had voted on them. (Of course LePage later refused to even issue bonds that had been approved by voters.)
One of the problems with having voters decide whether to send the pooled loans to the bond market is that the loans aren’t funded with tax dollars. The bonds may be backed by the “ moral obligation” of the state, but that only enhances the agency’s creditworthiness; it doesn’t mean the state is legally on the hook for payment.
It would be cumbersome, expensive and meaningless to require voters to give the ultimate yay or nay.
It’s good for Maine residents to know the difference between moral obligation bonds issued by agencies like the Maine Health and Higher Educational Facilities Authority and the “general obligation” bonds approved by voters for road and bridge construction, water infrastructure, sewer systems and the Land for Maine’s Future Program.
As opposed to the moral obligation bonds, the general obligation bonds represent debt secured by the “state’s full faith, credit, and taxing power,” as the state treasurer’s office puts it. That means the state uses tax money to pay the debt, and it’s legally obligated to pay off the loan.
It’s time LePage reopened the bond pool program for good. Just saying he’ll consider doing so is not enough. It is expensive and time consuming to prepare bonds for sale, and hospitals and colleges are unlikely to do it if they don’t know whether the governor will sign off. LePage should make his intentions to restart the program clear.