State Treasurer backs appropriation bond approach

DES MOINES – Iowa lawmakers could save up to $120 million over the life of a 20-year, $750 million bond issue by financing the borrowing with yearly state appropriations rather than dedicated gambling proceeds, according to State Treasurer Mike Fitzgerald.

An appropriation bond could shave the state's interest rate by one-fourth of 1 percent and pull a slightly higher rating that would be attractive to the bond market, the treasurer said.

If the state were to make such an issuance today, the interest rate could be as low as 5 percent, but the financial markets are highly changeable and it would take six to eight weeks to be ready for a bond issue once any legislation is passed and signed by the governor, he added.

“The cheaper and simpler way to go is an appropriation bond,” Fitzgerald said. “That's going to save us between $40 million and $120 million over the life of the project.”

Gov. Chet Culver and top legislative Democrats are “very close” to finalizing an infrastructure bonding plan, Senate Majority Leader Mike Gronstal, D-Council Bluffs, said Tuesday. However, they have not settled on a final dollar total or details of how the bonds will be paid off.

“We're working together to get to common ground,” Gronstal said.

The governor continued his “shovel-ready” tour Tuesday to tout his $750 million plan that would use $56 million yearly in state gaming revenues to finance the bonds over 20 years. Legislative Democrats also are crafting a similar package, but they put more emphasis on disaster recovery projects and less focus on roads and bridges.

Fitzgerald said the bond market would be more favorable to an appropriation bond because gambling revenues are more volatile and current Iowa law requires county votes every 10 years to reauthorize legalized gambling activities – something that makes investors skittish.