Minnesota Lawyer
The Minnesota Department of Administration received a $13.4 million bonding authorization in 2008 for improvements to the State Capitol. So far, $10.23 million remains unspent. (File photo: Bill Klotz)
Skeptics question Dayton’s $1B plan to create jobs
As Gov. Mark Dayton promotes his plan to borrow $1 billion for projects as part of a job creation strategy, state records show previous bonding projects with an even larger amount of unspent money.
As of Jan. 31, nearly $1.2 billion for projects approved for state bonding remains “uncommitted” or unspent, according to information from the Minnesota Management & Budget (MMB) office.
Most of those uncommitted projects were approved last year and many are transportation projects programmed for future years, including trunk highway bonds authorized through the $6.6 billion “Chapter 152” transportation plan approved in 2008.
But some critics point to the uncommitted projects as evidence that the bonding-to-create-jobs strategy is flawed.
Many bonding projects “are on the sidelines and waiting to be done,” said House Majority Leader Matt Dean, R-Dellwood. “Even if we were to pass a bonding bill, the jobs that would result from that … would likely not occur for several years.”
During a news conference on Jan. 28, Dean said he would like to put “an expiration date” on some authorized projects so they can “get going immediately. That should be our first priority. … We want to get these agencies off the dime.”
Dayton has recommended $531 million worth of new projects for state bonding in 2011, and he has asked the Legislature to come up with its own list totaling $470 million.
A news release from Dayton’s office says his bonding proposal focuses on “immediate job creation” for projects in “key areas of essential infrastructure, community assets and education.”
Dan McConnell, political director for the International Brotherhood of Electrical Workers Local Union 192, said it is frustrating that some projects have not started. But he quickly adds that “doing nothing doesn’t create jobs.”
“I think the governor’s proposal for bonding laid out a lot of projects that were shovel-ready,” McConnell said. “We certainly would support investing in projects that are ready to go. … We need jobs. We need to put Minnesota back to work.”
But even if a project is “shovel-ready,” it is not necessarily ready to create jobs because the state cannot use the money from a bonding bill until the bonds are actually sold, said Tom Hanson, a former commissioner of MMB.
That usually does not happen until July or August, he said.
“Even if you do the bond sale in June, you are talking half the construction season being done,” said Hanson, now an attorney with Winthrop & Weinstine‘s legislative and regulatory practice. “It is fairly typical for there to be about a year of construction season delay.”
It normally takes months to put together a $1 billion bonding package, Hanson said, adding that it would be a quick turnaround to do so in the short time Dayton has been in office.
“You spend months getting requests from agencies,” he said. “I always would travel all over the state looking at the projects. … Just because something was in the bill last year doesn’t mean it should be in the bill this year.”
A few examples of building projects with unspent bonding money include a hockey center at St. Cloud State University ($4.8 million), a renovation of Lommen Hall at Minnesota State University-Moorhead ($2.54 million), a St. Paul Armory renovation ($5 million) and a State Capitol restoration project ($10 million).
The State Capitol project, which was approved for $13.4 million in 2008, needs further study before all the money can be spent, said Jim Schwartz, a spokesman for the Minnesota Department of Administration.
“We are planning on doing a study of the exterior of the building this summer,” Schwartz said. “So it’s one of those things that takes a few years to jell.”
Numerous transportation improvements also are on the list, including $280 million for trunk highway bridge improvements approved as part of the “Chapter 152” funding.
Margaret Donahoe, executive director of the Minnesota Transportation Alliance, said that the Chapter 152 money is programmed for specific needs over a 10-year period, and that it was not intended as a strategy to create jobs overnight.
“When the bonds were authorized in 2008 there was not this sense of, ‘We need to hurry and get as many jobs as possible.’ The thought was to take care of the bridges that need to be replaced,” she said.
“But even if a bridge needs to be replaced, it doesn’t necessarily have to be replaced tomorrow,” she said. “MnDOT has programmed those bonding funds. … It’s not that these bonds are just sitting there and people don’t know what to do with them.”
John Bray, special assistant to the district engineer for the Minnesota Department of Transportation’s District 1, said the Chapter 152 bonds allowed work to begin on projects. Many projects take seven years from concept to construction, he said.
“If you don’t have the money assured to you, you don’t begin those investments because they are costly,” said Bray, whose Duluth-based district covers northeastern Minnesota. “You can’t commit staff time; you can’t hire consultants because you are betting on something that may never come. When 152 passed, everyone started [that process]. That is why much of that is not being expended.”
After a bond sale, the state puts the money in a fund managed by MMB and allocates it to legislatively approved projects as needed.
On Jan. 1 of every odd-numbered year, the state looks at uncommitted projects older than four years and determines if the funding should be canceled, according to MMB Assistant Commissioner Kristin Hanson (no relation to Tom Hanson).
Unless the Legislature reauthorizes those projects, the state cancels those unspent allocations effective on July 1 of that year. The most recent cancellation report, released Jan. 1, shows $10.1 million in cancellations.
It is not uncommon to have about $1.2 billion in uncommitted projects because some of the projects listed are quite recent, Kristin Hanson said. Projects approved in the 2010 bonding bill, for example, may still have to be designed.
Tom Hanson, the former MMB commissioner, said the state has had among the best debt management policies in the country.
The downside of more borrowing, he warned, is that the state’s debt service is now more than $1 billion per biennium.
“We have to be careful not to make it too easy to do $1 billion bonding bills every year,” he said. “They can be addicting.”
Rep. Alice Hausman, DFL-St. Paul, a former chairwoman of the Minnesota House Capital Investment Committee, said there are opportunities to immediately cancel bonding authorization to agencies that no longer need the money.
In some cases, she said, agencies had more money than they needed for a project because construction bids came in lower than expected.
But unless the current committee wants to be “ruthless,” she added, “there won’t be that much in terms of unspent money that they are able to cancel” this year.
“Ultimately we have to ask this question this year: What infrastructure has to be in place in order for the economy to recover, in order for the economy to thrive?” said Hausman, who has introduced a $1 billion bonding bill. “You can make the economic argument for higher education, wastewater infrastructure, transportation and even for some of those local economic development projects that are in both my bill and the governor’s bill.”
Unspent state bonding funds*
Trunk highway bridge improvements: $280M
Local bridge replacement program: $42.41M
Intercity passenger rail: $25.075M
State Capitol Building restoration: $10M
Historic Fort Snelling Museum: $1.438M
St. Cloud State University National Hockey Center: $4.8M
Minnesota State University-Moorhead Lommen Hall renovation: $2.56M
Minnesota Veterans Home, Minneapolis, HVAC improvements: $3.566M
Cedar Street Armory, St. Paul: $5M
Metropolitan State University classroom center: $3.1M
*as of Jan. 31
Source: Minnesota Management & Budget Office
