Sunday, March 2, 2008

Some Bonds Are More Equal than Other Bonds?
Or, How to Circumvent Minnesota State Bonding Limits

The following material has been sent to me by:

Michael W. McNabb
University of Minnesota B.A. 1971; J.D. 1974
University of Minnesota Alumni Association lifetime member

I have omitted a few things from the original, but added nothing myself.

Thanks to Mr. McNabb for allowing me to post this material.

In January 2006 the Chair of the Board of Regents responded to one of my early letters regarding the stadium by stating that the U was making it clear to the legislature that the "stream of financing" for the stadium should be separate from the regular state bonding bill. I replied by pointing out the legislature does not have two pots of money--one for athletics and one for all other purposes.

As it turned out, the University and the legislature came up with an idea to circumvent the statutory limit on bonding authority. Instead of issuing regular state bonds for the stadium, the legislature authorized the issuance of "University" bonds for the stadium. These bonds would still be paid out of general revenues collected by the state, but the state would not pledge its full faith and credit for the payment of the bonds. So, if the state revenues were not sufficient to pay the bonds, the U would have to make up the difference. Of course, the only source of revenue for the U is tuition.

On Tuesday evening the Senate Capital Investment Committee had a "hearing" on the state bonding bill for this biennium. The chair of the committe is Senator Keith Langseth. I called his office on Tuesday morning to ask to be placed on the list of persons who wished to testify. I received a call back from a young woman assistant in his office. She told me that the committee was not going to schedule any witnesses. I asked her if the committee was going to hold any other hearings. She replied that Tuesday evening was be the best opportunity to testify. I then asked how that could be if the committee was not planning to take any testimony. I then asked if that was the decision of Senator Langseth. The poor young girl then had a panic attack and hung up on me.

I attended the committee "hearing" on Tuesday evening at the Capitol. The committee approved a $1 billion bonding bill in less than 60 minutes. There was no debate and no testimony from any witnesses.

During the oral summary of the bill the staff member announced the bonding proposal for the biomedical facilities authority for the U. He said that the same financing mechanism would be used as for the stadium; namely, the legislature would authorize the authority to issue "University" bonds that would be paid from general revenues of the state, but the state would not pledge its full faith and credit. There was an audible snicker and laughs from the legislators at the committee table.

Now, today's edition of the Pioneer Press reports that the bonds for the authority are in jeopardy because the state commissioner of finance states that "University" bonds do count against the limit of bonds that may be issued for the biennium.

1 comment:

momo said...

So they are snickering at the U at the Lege now. Sad.