Financial upheaval leaves Borough biding its time on bonds

PALMER — Financial news has been anything but rosy lately on the national scene, but what the recent economic collapse credited to unbridled borrowing and leaving banks unwilling to lend means for local government projects dependent on borrowed cash is still unclear.

So far, local officials say there hasn’t been much of an effect, but most hedged, saying the market is far from certain.

When talking about municipal bonds, the body in the Mat-Su Valley that tends to do the most bonding is the Mat-Su Borough, while municipalities don’t borrow nearly as much.

For example, though Wasilla has issued bonds in the past, some the city is still paying off, when worrying about market uncertainties, it’s the bonds a body hopes to sell in the near future that are of concern. Already-issued bonds are generally set in stone.

For now, there’s nothing new on the horizon, said Wasilla Controller Troy Tankersley.

“I can only think of the library project coming up, but that’s in the infancy stage and I can’t say where it’s going to go,” or even if bonds will be used to pay for the thing, he said.

But at the Borough, it’s a different story.

The most immediate project dependent on bonding is the Goose Creek Correctional Center, the $220 million prison the Borough intends to build in Point MacKenzie and gradually sell to the state.

The plan to issue bonds to pay for the project has been delayed a week by the market crisis. Borough Manager John Duffy said the Borough was waiting on a backlog of municipal bonds to clear from the market before moving ahead with its sale. The Borough hopes to start selling bonds soon.

“The market is continuing to rally, and so what we’re doing is we’re getting prepared to jump in the market at the third week in November,” Borough Finance Director Tammy Clayton said.

The delay, Duffy said, will not stall plans to begin construction on the facility in spring 2009.

But the prison bonds are just the first. Next up, the Borough will be issuing bonds for $19 million in school improvement projects voters passed last month.

“We’re planning on moving forward with the school in probably the February/March time frame,” Clayton said.

After that, about June or July 2009, the Borough hopes to have word from the state Legislature as to which projects in a second raft of bonds — $15 million for road upgrades — the state intends to fund. The Borough is asking for 70 percent funding of the projects from the state. The $15 million would pay the Borough’s share. Projects lacking state money will not move forward.

“I think the market would be settled fairly well for the school bonds and for the road bonds,” Duffy said. “It’s so far out. You just don’t know. These are uncertain times.”

Nationally, some financial pundits are predicting municipalities like the Borough will have to curtail their use of bonds, if not stop the practice altogether. Duffy and Clayton said they don’t see that happening. The math just doesn’t work out for raising the needed millions.

“You just can’t get that, can you imagine the mill levy?” Duffy said. “If you put that over five years the mill levy would be through the roof.”

And, Clayton, added, the current system is more fair to taxpayers. If the price of a road upgrade is paid over the years after it’s built, the users actually benefiting from the improvement are the ones paying for it. If the Borough instead had to raise the money beforehand, folks who eventually leave the Borough would have paid for a road they never used.

Contact Andrew Wellner at andrew.wellner@frontiersman.com or 352-2270.