Alaska’s got billions in the bank, so why’s it looking to put the new roads and ports it wants on its credit card?
The answer, say legislators and state finance officials, is flexibility.
Borrowing the money to build projects now leaves the state with cash in the bank, as opposed to making annual payments on $454 million in bonds each year.
“Once cash is spent, it’s gone,” said Angela Rodell, deputy commissioner for the Treasury.
By borrowing now, she said the state could lock in low interest rates, likely at below 4 percent.
The state’s credit ratings, the highest possible from Standard & Poor’s and Moody’s, means borrowing is a good deal for the state, she said.
At the same time, the amount that would have been spent can be invested, presumably earning the state more than the cost of debt service.
The state expects to earn 6.85 percent on its billions in long-term savings, Rodell said.
“I don’t know who wouldn’t refinance their house at those rates,” said Rep. Beth Kerttula, D-Juneau.
The bonding has widespread support, and is expected to pass by the scheduled end of the session today.
Parnell proposed bumping up capital spending by $350 million with the bonding package, which the Legislature has increased to $450 million, adding western Alaska port projects. Also part of the package will be $3.6 million in costs to issue the bonds.
The bond package included two road projects for Juneau.
Mendenhall Loop Road will get a $6 million improvement project; Glacier Avenue will get improvements between mileposts 4 and 6.
The bulk of the money will go to Anchorage projects, including $50 million for the Port of Anchorage, and another $126 million for other Anchorage projects, including $35 million for the Glenn Highway, $15 million for the Glenn Highway/Muldoon Road Interchange and $15 million for O’Malley Road.
Other Southeast projects include $14 million for a road to Katlian Bay in Sitka and $19 million to reconstruct and extend Shelter Cover Road in Ketchikan. Projects elsewhere include $10 million each to Nome and Kotzebue for work on deep draft ports.
Not everyone likes borrowing now.
“I think if we’ve got the money we should pay for it, and we’ve got the money,” said Sen. Dennis Egan, D-Juneau, but he said he would not stand in the way of sending the bond package to voters.
Rep. Cathy Munoz, R-Juneau, said she agreed with Egan’s philosophy, but that due to the state’s stellar credit rating and current low interest rates this was a good time to bond instead of spending cash.
“I’m glad this goes to the voters, because we’ll see if they agree these are good projects.
Munoz and Kerttula said the need to win support for the bonds from around the state means that all regions will see projects for them in the package.
Rodell said that if a majority of the voters approve the general obligation bonds in November, the state would begin issuing bonds in February of 2013.
• Contact reporter Pat Forgey at 523-2250 or at email@example.com.