As voters were headed to the polls on Tuesday a battle was brewing at the state Capitol between a member of the state Bond Commission and state Treasurer Denise Nappier.
Late Tuesday morning Rep. Vincent Candelora of North Branford, who is one of 10 Bond Commission members, faxed Nappier a letter expressing his concerns. The letter was also sent to Gov. M. Jodi Rell, who decided to postpone the Aug. 11 Bond Commission meeting until next week to give Nappier time to address the Republican lawmaker’s concerns.
What’s at stake? About $260 million to help build high-speed rail, and $226 million to buy 80 passenger cars for Metro-North’s New Haven line.
But Candelora said his concerns are bigger than borrowing for one project or another. It’s about the state’s cash position.
Candelora reiterated concerns, which he has been voicing for months, about the state’s decision in 2009 to issue $580 million in Bond Anticipation Notes, or short terms bonds. The BANs were issued in 2009 with favorable interest rates of 0.47 percent and 1.15 percent, along with $1.135 billion in general obligation bonds, to address the states sharp drop in revenue.
The short term bonds were issued to enhance the states cash position, state Treasurer Denise Nappier said Tuesday.
But Candelora is concerned that the state continues to issue more debt to pay off the first round of debt it issued in 2009.
“Given the fact that the state may still have enough bonds already authorized to fund capital projects, I am not included to support the authorization of more bonds,“ Candelora wrote Bond Commission members Tuesday.
Because of Candelora’s concerns Rell postponed the Bond Commission meeting until 9 a.m. Tuesday, Aug. 19.
“I trust this extra time will give the Treasurer’s office time to answer any and all questions from Bond Commission members,” Rell said Tuesday.
Nappier, who manages the states cash and debt, immediately responded to Candelora’s last-minute concerns and tried to reassure him the state does not have any cash flow issues as he implied in his letter.
“The fact is that Connecticut does not have a cash flow problem, unlike other states, because of our proactive approach to managing the state’s cash and debt,” Nappier said. “Had BANs not been used in FY 2009 to aid the state’s overall cash position, other methods of cash flow borrowing (more than likely at higher interest rates) would have been necessary to ensure our ability to meet the state’s obligations to municipalities, vendors, and employees.”
Candelora was also curious about whether Nappier had paid off the $580 million in BANs in light of the state’s $393 million surplus certified earlier this month by state Comptroller Nancy Wyman.
But Nappier reminded Candelora that all the surplus money was already dedicated to other debt payments.
“You may recall that the General Assembly and Governor have already determined that $140 million of that amount will be used to fund operations for Fiscal Year 2011, and the balance will be used to reduce the planned issuance of Economic Recovery Revenue Bonds for Fiscal Year 2011,” Nappier wrote in her response to Candelora.
She also reminded him that her office doesn’t need the Bond Commission’s authority to use general obligation bonds to pay off the BANs since it already received approval from the governor in 2009.
This short term borrowing falls outside the legislature’s budgeting process and the authority of the Bond Commission. Candelora has urged the governor for months to rescind the letter that granted the treasurer this authority.
The treasurer’s office has been back and forth with Candelora on the issues of short term borrowing and cash flow since March.