Governor Patrick Takes Fiscally Responsible Approach to Investing in the Commonwealth's Capital Needs
5-year plan to include bond cap increase, debt service decrease
The stable annual increases in the "bond cap" will allow the Administration to make meaningful progress in addressing the immense backlog of infrastructure needs-including transportation projects, educational facilities, and public safety improvements-facing every region of the state.
"The citizens of the Commonwealth deserve safe roads and bridges, quality school buildings, and clean and secure parks and beaches," Governor Patrick said. "Our public assets have endured a long period of neglect that has put many of them in serious need of repair. We must begin reversing that pattern. This is a start."
The Patrick-Murray Administration's capital financing plan is based upon a fiscally responsible and rigorous debt affordability analysis. While the annual borrowing limit is expected to increase by $125 million per year over the next five years, the debt service as a percentage of total budgeted revenues by 2012 is projected to be less than FY2007. With this approach, the Commonwealth will increase its level of public asset investment, while still preserving additional capacity in the operating budget to fund needed programs.
The Administration's prudent approach to setting the annual bond cap will ensure that annual debt service payments on all of the Commonwealth's bonds and other debt-like payment obligations will decrease over time as a percentage of total budgeted revenues.
In its 2006 report, the Joint Committee on Bonding, Capital Expenditures and State Assets recommended an increase in the bond cap, as well as other recommendations the Administration intends to address in its capital plan.
"We have a tremendous opportunity to expand our economy and create thousands of jobs through properly maintaining and expanding our capital assets," said Sen. Mark Montigny (D-New Bedford), co-chair of the committee. "I commend the Governor for working with us to ensure transparency and integrity in the public construction process."
"I strongly support the administrations plan to increase the amount of the annual capital spending limit," said Rep. David Flynn (D-Bridgewater), co-chair of the committee. "The plan is consistent with the recommendation of this committee relative to increasing the cap. The administration has done an excellent and thorough financial analysis to support its plan. The plan provides for a long-overdue increase in the bond cap to $1.5 billion, which will address the inflation in capital costs since the last increase. This increase-and the annual incremental increases to $2 billion by FY 2012-will greatly help the Commonwealth in beginning to address its most pressing capital spending needs, while keeping the state's debt service expenditures at a fiscally-responsible level."
Each of the rating agencies that evaluate the creditworthiness of the Commonwealth's debt believes that the Administration's policy for determining the bond cap is a positive step forward in debt management.
In developing its five-year capital investment plan, the Administration faced serious challenges. As noted in the recent Transportation Finance Commission report and the report released Tuesday by the Pioneer Institute, the Commonwealth has billions of dollars of deferred capital maintenance needs. Billions of dollars in capital project spending needs have also been identified by state agencies, legislators and others-capital spending needs identified by state agencies alone exceeds $15 billion over the next five years.
Although it will not address all of the identified capital project needs, the Administration's approach to raising the bond cap will result in meaningful progress toward improving the network of public infrastructure that the citizens of the Commonwealth rely on in their daily lives. The Administration will soon be releasing a transparent and comprehensive capital investment plan which describes how it will allocate these capital investment resources to make the Commonwealth a better place to live, work, and raise a family.