PROVIDENCE – The Rhode Island Public Expenditure Council released a report Friday that analyzed the state’s budget outlook, debt position and their relation to the 2018 ballot initiatives – specifically on the three bond referendums.
Traditionally, RIPEC does not take a position on bond referendum questions.
The organization projected the three bonds to have a combined cost (if all approved) of $589.5 million on a borrowed principal of $367.3 million.
“It is necessary to consider the three bond referenda proposals in light of the state’s structural deficit, overall debt position, and the fiscal implications of bond repayment,” stated John C. Simmons, executive director of RIPEC. “Voters should also consider how the bond referenda may impact Rhode Island’s long-term policy goals, and to what extent public investment in the proposed projects is likely to strengthen the state’s economy overall.”
The report noted that based on preliminary estimates, the state began fiscal 2019 with a $45.5 million surplus from the end of fiscal 2018, the result of revenue being $2.1 million less than expected and expenditures coming in $16.3 million lower than anticipated when the budget was enacted.
RIPEC expects the state to record a $14.5 million surplus in fiscal 2019, but noted that out-year deficits “will continue to hamper the state’s ability to support long-term investment.”
The report also included that as of June 30, 2018, Rhode Island had $1.2 billion in outstanding tax-supported direct debt. The state’s net tax-supported debt was $1.8 billion. Debt as a percent of personal income in Rhode Island was 3.2 percent in fiscal 2017 and is currently projected to be 3 percent in fiscal 2020 and 2.4 percent in fiscal 2023.
RIPEC notes that the bond referendums will by definition raise the state’s debt obligation, a “important consideration,” noting that the while state has made “significant improvements” in debt management, Rhode Island remains in the top third in the nation for debt per capita and as a share of personal income.
It also noted that capital investments, like the three capital projects on the table in November, boost the economy and improve infrastructure and are not typically recurring costs.
The bond questions are for these three capital projects:
- $250 million to rehabilitate and/or replace municipal Rhode Island school buildings, which with projected interest will cost $401.2 million
- $70 million for higher education facilities, with a total expected cost of $112.3 million
- $47.3 million for a green economy and clean water bond (with multiple projects), which is expected to cost a total of $75.9 million with interest
The combined interest of all three bonds is projected at $222.1 million to the principal amount of $367.3 million.
The Rhode Island school buildings general obligation bond proposal set forth by the state also has another $250 million bond question planned for 2022.
If the school referendum is approved, the state will approve a time-limited bonus program to reduce project costs for local school districts. RIPEC noted that the program is an entitlement program, meaning the state would be obligated to pay its share of any eligible projects that are proposed by school districts, posing a risk that demand could exceed the bond, cutting into the general fund.
The higher education facilities bond would pay for construction projects at the University of Rhode Island and Rhode Island College – $45 million for URI’s Narragansett Bay Campus for the School of Oceanography as well as the College of Engineering and the College of Environment and Life Sciences, and $25 million would go toward renovations to RIC’s Horace Mann Hall, which houses the college’s School of Education and Human Development.
The Green Economy and Clean Water bond referendum would be used for 10 projects around the state such as coastal resiliency programs, wastewater treatment facility improvements, dam safety, recreation projects, and brownfield remediation and economic development, among other purposes. RIPEC noted that the R.I. Department of Environmental Management said that the useful life of revitalized infrastructure projects included in the referendum is between 25 and 50 years. A dredging project in the Downtown Providence rivers is expected to be useful for 20 years.
The full report, which includes recommended voter considerations and questions may be found on the RIPEC website.
Read PBN’s cover feature on November’s ballot questions here.
Chris Bergenheim is the PBN web editor. Email him at Bergenhiem@PBN.com.