2003-03-27_PWETC_AgendaPacket - Laserfiche WebLink

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open bidding, signing contracts, and selling bonds. Many projects that are partially through this process could be delayed or cancelled. For developing communities, these proposals would make it very difficult to bond for new infrastructure. At least one large, fast-growing city is contemplating a moratorium on new development in response to these proposals. If this phenomenon is widespread, it will create a severe impact on the availability of new housing and on the construction industry, and could push development into neighboring states or township areas (which are not covered by the governor's proposal). For older communities, redevelopment projects could similarly be jeopardized if cities are restricted in their ability to issue debt or raise debt levies. In addition, many older cities are in the midst of 20 or 30 year plans to replace all their streets. Each year they sell bonds to pay for that year's street replacements. Even though the amount of debt they service each year does not change, the governor's proposal would not grant levy authority for many of these projects for 2004. City officials and public finance professionals are also concerned with the governor's proposal for a reverse referendum procedure after 2004. Under the procedure, cities could not be assured that they would be able to increase their levy to pay debt service on bonds issued during the year until the following January. This uncertainty would not only be challenging for city budgeting purposes, it would also likely increase the perceived risk to the bonds, decreasing their credit rating. Cities should be cautious about changing their behavior due to one proposal or the other. For example, if a city looks merely at the governor's proposal and decides to enter into a binding contract for an upcoming project prior to the May 1,2003 deadline, the city and its taxpayers are then more exposed if the Senate's plan is adopted. Under that scenario, the city could be obliged to pay the cost of the contract with no ability to issue bonds, and, therefore, would be required to fund the entire cost ofthe project upfront with other existing revenue sources. Both the governor's and Senate's proposals would result in delay and cancellation of many necessary capital projects at a time of historically low interest rates. This would disrupt long-range plans and increase costs to taxpayers. It would also have major impacts on the construction, engineering, and architectural sectors of our economy at a time when there is already a dearth of construction activity. The unceltainty these proposals introduce into the bond market will also likely drive up costs of borrowing to local governments. The League will be communicating our concerns to the governor and legislative leaders in meetings scheduled this week. LMl:llJJard of Dir~G1QrA ];;ditor: Eri~1Lr!g[ri~ Desi?ner~ 1J;l)Jx~ Zenz Exe~utiy~irectoG JimMi!1~r Copyright iQ20Qll,~afue of Mi!w.esota Cities 145 University Ave. West, St Panl, MN 55103 Phone: 651-281-1200 I Toll Free: 1-800-925-1122 Fax: 651-281-12991 TDD: 651-281-1290 Return to Hom~