Official worried that state bond plan may fall through

JEFFERSON CITY, Mo. -- A plan to help balance Missouri's budget with revenue bonds may fall through for lack of time, a top state official warned Tuesday.

The process of issuing revenue bonds typically takes four to six months. But the state is trying to do it in less than two months, to pump $150 million into the state budget for the fiscal year that ends June 30.

"We've never put together a revenue bond sale this quickly," Jim Carder, director of the state's Division of Accounting, told the board responsible for issuing the bonds. "We haven't given up hope, but I can't guarantee you we'll get it done in time."

The bonds would have to be issued in April to plan for expenditures for the remainder of the fiscal year, Carder said.

First, however, legislators must take several steps demonstrating the state's commitment to pay off the bonds, Carder said. Private consultants must be brought in to help arrange the bond sale. And the State Board of Public Buildings must meet two more times -- once to set up a bond sale and again to actually sell the bonds.

"We're still in a very high-risk scenario," Carder told the Board of Public Buildings, which consists of Gov. Bob Holden, Lt. Gov. Joe Maxwell and Attorney General Jay Nixon, all Democrats.

With Nixon dissenting, the board voted 2-1 Tuesday to authorize the Office of Administration to take all necessary steps to arrange a legal counsel and financial adviser for the bond sale. Nixon said he was concerned about delegating the board's power to the bureaucracy.

Carder said he would seek to amend the contracts of the bond counsel and financial advisers hired earlier for the planned sale of bonds backed by future revenue from the state's settlement with big tobacco companies.

Legislation authorizing tobacco bonds passed last year. But when that type of bond proved costlier than expected, Carder suggested guaranteeing the bonds both with tobacco revenues and the state's general treasury.

That idea also was scrapped when lawmakers instead opted for the traditional revenues bonds, which will have the lowest interest costs.

In this case, the revenue bonds would pay for already-planned construction and repairs at buildings owned by the state or its colleges and universities. That would free up money to help cover a projected $400 million shortfall for the fiscal year ending June 30.

Legislators passed a bill last month authorizing the issuance of about $400 million in revenue bonds, which after costs would net the state about $335 million. The bill allows for $150 million of the revenue to be applied to the current budget and the balance to next year's budget.

The Legislature still must appropriate money to pay for this year's bond issuance and demonstrate a commitment that bond money also will be included in next year's budget, Carder said.

In addition, the Joint Committee on Legislative Research must approve the list of construction projects for which bond proceeds would be used. House Speaker Catherine Hanaway, a member of that committee, said she expected the projects to be approved at a meeting Wednesday.

"I don't know how we frankly could have acted more expeditiously once there was an agreement with the governor" on how to cover the budget shortfall, said Hanaway, R-Warson Woods.

Carder said that the state still owes $95,000 to the bond counsel retained to work on the tobacco bonds. That same law firm has agreed to work on the revenue bonds under an amended contract for an additional $100,000, he said.

The state owes nothing to the financial advisers chosen to handle the tobacco bonds. But the same companies, under an amended contract, would handle the revenue bonds for $90,000, Carder said.