Gov. Paul LePage said this week he will consider signing bonds for nonprofits, including hospitals and colleges, and said he doesn’t know why anyone thought he had shut down the program.
Proponents of the program, which helps nonprofits get low-interest loans for major projects, were pleased and surprised by the news. They said the governor made it clear three years ago that he was opposed to the program and they’d seen no indication that he’d changed his mind.
The governor’s spokeswoman, Adrienne Bennett, said LePage was willing this past fall to restart the program.
“In 2013, once the hospitals had been paid off, the governor did say at that time he would release all bonds,” she said. “He said ‘all bonds’ when he made many, many statements about bonds after the hospitals were paid off.”
However, Bennett could not provide an interview, news release or quote from the governor from that time showing that.
“There are multiple times when he said it, but I don’t have that in front of me right now,” she said.
In news releases from that time and in a letter to the Legislature, LePage talked only about signing specific voter-approved state bonds and an infrastructure bond package he favored. There was no mention of the 20-year-old pool bond program for nonprofits, which LePage effectively shut down in 2011 because he said he was concerned the state could be on the hook if any of the nonprofits defaulted on their loans.
When told that the only information available showed LePage talked solely about voter-approved state bonds, Bennett said, “That’s right.”
“But when he made that statement, too, he meant all bonds were up for consideration,” she said.
When pressed about whether LePage actually said all bonds would be considered, Bennett said, “I don’t think at the time reporters asked for clarification on it.”
At issue is the pool bond program run through the Maine Health and Higher Educational Facilities Authority, a quasi-state agency. For two decades, Maine nonprofits were allowed to pool major projects and, with help from the authority, issue tax-exempt bonds together. Such pool bonds gave them lower interest rates and better loan terms than they could have received by seeking financing on their own.
Unlike bonds for road work or other state projects, Mainers did not need to vote on bonds issued by private nonprofits because no taxpayer money was involved.
In early 2011, the authority sent its latest pool bond paperwork to LePage for his signature. IRS rules require all tax-exempt revenue bonds be approved by the highest elected official in the jurisdiction. In the previous two decades, Republican, Democratic and independent governors all signed without much comment; it had become routine.
However, LePage said no.
His refusal stunned Maine’s nonprofit community, which had come to rely on the program for less costly, easy financing. Eight hospitals, colleges and other nonprofits were in that pool and expected to get $31 million in financing for projects already planned. Others, including MaineGeneral Medical Center in Augusta, were working on projects and planned to seek financing in later pools.
MaineGeneral officials have said alternative financing for their new hospital would cost an extra $42 million over the 30-year life of the loan. When the state paid off its old MaineCare debt, the hospital received about $47 million.
The former head of the Maine Health and Higher Education Facilities Authority, the current head of the authority and nonprofit leaders said LePage and then-State Treasurer Bruce Poliquin had made it clear that the pool bonds would no longer be signed.
Poliquin has refused in recent weeks to talk about the pool bond program or to answer questions about the 2011 decision, saying he is in the middle of a campaign. He is running for Maine’s 2nd Congressional District.
Maine has no legal obligation to pay if a nonprofit defaults, but it does have a “moral obligation.” If abandoned and left unpaid, such a loan could potentially hurt Maine’s credit rating.
Program proponents say safeguards are in place to prevent that, including at least two multimillion-dollar reserve accounts.
Bennett acknowledged that there is “no direct correlation” between the state’s moral obligation for nonprofit bond debt and the payment of about $490 million owed to hospitals for past MaineCare debt. But she said Maine would be better able to deal with a nonprofit’s default because the hospitals have been paid.
“Obviously, with the (Maine bond rating) upgrade and some of the things we’ve been able to achieve as an administration in terms of financial stability, yeah, we’re in a better position. I think that’s where the governor’s coming from,” she said.
She said the governor hadn’t considered any new nonprofit pool bonds since the hospitals were paid last fall because no applications had appeared before him.
Nonprofits and proponents of the program have said it takes money and time to put together a pool bond, and they haven’t wanted to waste resources on a bond package doomed to fail.
Robert Lenna, former head of the Maine Health and Higher Educational Facilities Authority and the Maine Bond Bank, said he hadn’t been told the governor’s position on pool bonds had changed.
“If he said that to someone, I was never told of that conversation,” Lenna said.
Bennett pointed out that LePage signed a moral obligation bond for the Maine Educational Loan Authority as recently as May. However, he’d made an exception for MELA before, right after he denied the nonprofit pool bond.
Bennett said LePage’s economic policy adviser, John Butera, met with officials from Thomas College in Waterville in April and told the nonprofit school the governor would consider nonprofit pool bonds.
A spokeswoman at the college declined to comment. In a Sun Journal story two weeks ago, the school’s vice president of financial affairs said Thomas College needed to borrow from a bank for its latest construction project, though they would have preferred to have financed through a pool bond. She made no mention of a meeting with Butera or learning of a change in the governor’s policy.
State Treasurer Neria Douglass said she’s pleased the pool bond program may get started again, but she’s concerned the governor only is saying he will “consider” the proposals.
“The issue will be, ‘Are they wasting money preparing bonds the governor won’t sign?’ If he’s saying he’ll ‘consider,’ that’s not very secure. That’s not a promise,” Douglass said. “I’m on that (authority) board. We’ll have to weigh what that means.”
Bennett said the governor is aware of the time and money involved in readying a pool bond for his signature, and he understands some nonprofits may be leery of the risk. He’s looking at ways to lower that risk, she said.
“Can we get to a point where the application doesn’t necessarily have to be completed? Maybe we can get a summary of the projects and the governor can take a look at those. That’s a possibility. We’re in those sorts of talks right now,” Bennett said.
Michael Goodwin, executive director of the authority, said he hadn’t heard LePage was willing to consider restarting the pool bond program after the hospitals were paid.
“I hadn’t heard it linked directly to that, but I’ll defer to the governor that that’s what he meant. And maybe it was just a misunderstanding, which is fine, also,” Goodwin said.
He’s happy the program may start up again.
“It’s great for everyone,” he said. “It’s great for all the borrowers that we serve, and I look forward to getting something over (to the governor) so we can get this program going again.”