AUGUSTA, Maine — Maine State Treasurer Terry Hayes said Friday that Gov. Paul LePage has refused to approve the sale of $117 million in bonds funding hundreds of construction projects and backfilling $54.5 million in funds that were borrowed internally from state government’s cash pool earlier this year.
Hayes said the bonds are scheduled to be sold Tuesday in New Jersey but that the deadline for LePage to sign off on them so they can be closed in time passed Thursday afternoon.
“The governor doesn’t have any more time,” Hayes said Friday evening. “He has already agreed to everything that was in the sale, but I can’t make him do it. I spoke with him yesterday afternoon, and he was adamant.”
LePage’s office and a Maine Department of Transportation spokesman did not respond to questions from the Bangor Daily News on Friday afternoon.
Hayes said the bulk of the money was for transportation projects — some of which are underway — but also contained funds for environmental, drinking water, housing and research and development projects.
Hayes said another problem with the bonds being blocked is that the state borrowed $54.5 million essentially from itself — which she said LePage authorized with financial orders — earlier this year, which was to be repaid after the bond sale. Internal borrowing like this is common and seen as a way to save money versus selling bond anticipation notes and paying interest on them.
“We had the cash on hand, so we used it,” Hayes said. “I’m not entirely certain but I believe we would have to take that money out of the budget stabilization fund, but it’s not up to me to solve that problem. That rests on the executive branch.”
The Republican governor’s apparent opposition to the bonds was a stunning move that sent a shock through the state’s construction industry and threatens to disrupt a short construction season just as the Maine Legislature was moving toward the end of a hotly contested legislative session.
Bond sales are a typically routine process run by the treasurer’s office to fund large investment projects. The bonds in question were all approved by voters at referendum, including some that date back to 2013.
LePage and Hayes, an independent who is running to replace the term-limited governor, have sparred on bond authority before. LePage briefly held up $600 million in money earmarked for construction projects last year over a contract with bond lawyers. The two struck a deal days later, ending an impasse that threatened 4,500 jobs.
But this delay is different because projects are already underway. Matt Marks, the CEO of the Associated General Contractors of Maine, said the money would be used to continue funding more than 350 active projects across Maine that are employing more than 2,000 people. He said it’s unclear whether the department would be able to continue funding active construction jobs during any dispute.
If they couldn’t, Marks said that companies could be ordered to stop work at active sites, which could be costly. He said in Hallowell alone — where crews have been working since early spring to rebuild a crowned main street — it would cost $25,000 to close the construction site and make it safe for the public.
Marks said that while word of LePage’s opposition to the bond sale started getting out in Augusta on Thursday, it’s unclear why the governor is holding it up or whether or not he wants the Legislature to act on some of his priorities during the waning session — such as slowing down future minimum wage increases under a law approved by voters in 2016.
“I don’t even know what the argument is about this,” Marks said. “There’s nothing construction-related that’s holding this up, as far as I know.”
Hayes said she also does not know why LePage won’t sign off. She said she has already notified the entities that bought the bonds after a bidding process — Citigroup Global Markets and Wells Fargo — that the sales are off. She said this could hurt Maine’s borrowing power in the future.
“This is highly unusual at this stage. It hasn’t happened before in Maine,” Hayes said. “We anticipate some significant ramifications when we go to the bond market next. … Whenever you introduce more risk into a financial transaction, the cost goes up.”
If it is a legislative priority that LePage is using to hold up the bond sale, time to address it is limited and few others in Augusta will likely back the governor in this fight. Lawmakers adjourned in early May amid a partisan dispute over a spending package.
But Republicans and Democrats came back this week and sent two compromise spending packages to LePage’s desk, though they haven’t yet come to a consensus on a new bond package that could go to voters in November and releasing taxpayer funds for campaigns.
The House and Senate are due to reconvene Monday with legislative leaders hoping for a quick end to the special session.
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