Convention Center prompts juggling Governor finds expansion funds

January 26, 1993|By William F. Zorzi Jr. and Suzanne Wooton | William F. Zorzi Jr. and Suzanne Wooton,Staff Writers

Gov. William Donald Schaefer will propose to the legislature a package of potentially controversial measures for financing the state's $115 million share of the Baltimore Convention Center expansion.

The plan would shift projects -- including Baltimore-Washington International Airport's new international terminal -- out of Maryland's limited capital budget and defer the start of other construction projects precious to lawmakers.

That effectively would give the state more room to issue bonds for construction projects and still stay under this year's self-imposed limit of $350 million that protects Maryland's coveted AAA bond rating.

"What's driving this is the Convention Center," said Transportation Secretary O. James Lighthizer. "The governor's got a problem. He needs bonding capacity. This can address the issue."

Baltimore finance officials, faced with a capital spending limit themselves, also are grappling with ways to pay the city's $50 million share of the Convention Center expansion.

The difficulty facing both the state and the city is that bonds paid back with tax money must be counted against self-imposed debt ceilings. But bonds that are repaid from a specific nontax revenue source, such as tolls, are not counted against the cap.

State officials say the bonds to pay for the $130 million international terminal would be repaid largely with money from a $3 airline ticket surcharge over the next 10 years. As a result, those bonds could be sold by the Maryland Transportation Authority which oversees the state's toll bridges, tunnels and highways.

In the arcane world of government finance, part of Mr. Schaefer's plan -- moving the BWI project from under the cap -- is viewed by some as a resourceful juggling act.

"It's very smart politics. . . . It's creative financing," said William K. Hellmann, a former state transportation secretary who chaired a task force that recently recommended all airport and port projects be placed under a "super" financing authority, outside the state's capital budget.

Based on preliminary information, analysts with government -Z bond rating agencies said, Mr. Schaefer's plan probably would not affect the state's AAA rating, the highest possible, but one cautioned that the state shouldn't "try to hide the debt.

"Maryland has been very good and upfront and honest about its debt obligation, and I wouldn't want to see them obfuscate . . . the debt now," said Claire G. Cohen, an analyst with Fitch Investors Service.

Mr. Lighthizer insisted, however, that moving the airport project is "a technical financial shift, not some slick maneuver." Nevertheless, some General Assembly leaders are skeptical.

'There's too much going on'

"He [Mr. Schaefer] will have a problem with that," state Sen. Laurence Levitan, D-Montgomery, chairman of the Budget and Taxation Committee, said of the BWI project. "There's too much going on to make sure we can stuff the Convention Center in the budget somewhere. Everybody is going to look pretty closely at that."

The state financed construction of the Convention Center in 1979. Some legislators begrudgingly view it as one of the first in a long list of state-funded projects for Baltimore. Mr. Schaefer and others, however, argue that the Convention Center has a strong ripple effect on the state's economy.

A second piece of Mr. Schaefer's plan to fund the expansion would require that the state's 24 jurisdictions sell their own bonds to pay for local transportation projects, rather than rely on state government. Those bonds are now sold by the state, which means that the debt is counted against the state's affordability cap.

Frederick W. Puddester, deputy state budget secretary, said the change would be a financial "wash" for those jurisdictions because local governments already pay the principal and interest on the bonds.

But without the benefit of the state's high bond rating, some local governments -- particularly smaller, rural counties -- will end up paying more in interest on future bond sales, he acknowledged.

"We obviously are very concerned and interested in any action by the state that would affect local costs and the use of funds from these bonds," said Kristen Mark Hughes, associate director of the Maryland Association of Counties.

The state also plans to refinance $54 million in local transportation bonds that were sold when interest rates were higher. That, in effect, would save local governments about $3 million, Mr. Puddester said, because interest rates have dropped.

The governor's third prong to fund the Convention Center calls for deferring some routine projects in the capital budget, though avoiding the most politically sensitive "pork barrel" items.

In addition, "no school construction would be affected," said Page Boinest, the governor's press secretary.

Each of the three measures in Mr. Schaefer's plan would free up between $35 million and $40 million of bond capacity from the debt ceiling over the next two years, Mr. Puddester said.

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