Culver looking for votes for his bonding plan

DES MOINES - Gov. Chet Culver conceded Monday he has a lot of work to do to get the votes needed to pass his $750 million bonding plan to fund a variety of job-creating projects, including disaster recovery.

"I've been very clear about the importance of getting this bonding initiative done for a number of reasons," Culver said after an Executive Council meeting. "We're going to continue to work hard to try to get it to my desk.

"I really think that we've got to help these flood victims," Culver said. He's identified at least $150 million of the bonding package to go directly for flood recovery assistance businesses and homeowners.

State assistance is absolutely necessary for those communities, according to Cedar Rapids City Manager Jim Prosser. He encouraged legislators to consider the recovery aid an investment in the state's future.

"We simply cannot recover without the state's help," Prosser said on Iowa Public Radio's The Exchange. "We appreciate their help and in return, we believe we can help the state recover more quickly."

Flood-damaged communities such as Cedar Rapids, Iowa City and Coralville are major revenue generators for the state, especially in terms of sales taxes and income taxes, Prosser said.

"Providing this money now will help Cedar Rapids recover more quickly and that means the state will have more revenue sooner," he said.

Lawmakers are likely to take up the bonding proposal this week. At a weekend forum in Cedar Rapids, Linn County legislators said some rural Democrats are balking at the bonding plan, so they say some Republican votes will be needed to pass the governor's plan.

Culver is optimistic votes can be found to pass the plan and said he would be meeting with lawmakers to secure the needed votes.

Republicans, who tend to prefer a pay-as-you-go approach, say that based upon Democrats' talking points, there are significant differences between Culver's plan and one put together by legislators. Culver would use about $56 million a year in gaming revenues to pay off the bonds over the next 20 years. Lawmakers believe they can get a better interest rate on bonds if they repay them with general fund dollars.

Republicans argue it makes more sense to use the state Rebuild Iowa Infrastructure Fund to pay for the governor's projects. Rep. Scott

Raecker, R-Urbandale, pointed out the majority Democrats diverted $90 million of gaming revenues last year that could have been spent on infrastructure. Taking additional steps, such as not spending $11 million to buy 600 vehicles for the state's 2,600-vehicle fleet next year, would also provide funds for priority items, such as disaster recover, and to avoid layoff at the Department of Human Services, he said.

There are plenty of examples of both bonding and pay-as-you go approaches at the state level, according to Iowa State University economist David Swenson. Referring to a Department of Transportation report that the state needs to invest about $67 million a year to meet critical transportation infrastructure needs, Swenson said bonding may be the only way to catch up.

Raecker is right when he says borrowing $175 million is likely to cost the state more than $300 million when paid back over 20 years, Swenson said. Whether that's the right approach, however, is a "political judgment."

The governor's plan does appear to be an economic stimulus package that would put about 1,500 people to work for every $100 million of investment, Swenson said. It would result in about $60 million in labor income.

 Overall, he added, the $750 million plan is "relatively small" in terms of the state's $130 billion economy.

Here is their preliminary outline of legislative Democrats' $700 million bonding plan:

Phase I: $175 million to replace bonding approved in 2008. The state was unable to sell the bonds because of the market. The bulk of the funds go to the Department of Corrections.

Phase II: $300 million for Gov. Culver's I-JOBS program, including flood relief, water treatment plants and housing. An I-JOBS board created by the bill would distribute $133.5 million including $15 million for alternative energy grant and $46.5 million for Linn County projects, specifically: steam energy, $5 million; Human Services Resource Replacement Center, $10 million; National Czech & Slovak Library & Museum, $10 million; Palo fire station, $1.5 million; Options of Linn County, $5 million; Paramount, $5 million; Cedar Rapids Public Library, $5 million; Cedar Rapids Public Works Building, $5 million.

Phase III: $125 million including $100 million for state vertical infrastructure projects to be decided by the 2010 Legislature and $25 million for public broadband technology. Those funds could be used to update the Iowa Communications Network.

Regents: $100 million in academic revenue bonds for the University of Iowa flood recovery and rebuilding projects. The bonds are backed by tuition but historically the Legislature has appropriated "tuition replacement" to pay for the bonds instead of using tuition revenue. As of March 2009, the total outstanding debt service on actual sales of academic revenue bonds is $457 million. Debt service is scheduled through FY 2035.