In November, voters will be asked to consider two bond questions that would authorize $89.7 million in new general obligation debt. This Comments summarizes the proposed referenda and key facts concerning public debt in the Ocean State. In addition, the report compares Rhode Island’s debt level and bond ratings to those in other states as well as national mean and median levels. It also comments on measures of affordability and discusses the two bond questions that will be put before the voters on November 4, 2008.
Rhode Island has made significant progress in managing its debt over the past 20 years and the state has maintained debt levels within the guidelines adopted by the Rhode Island Public Finance Management Board (PMFB). At the same time, however, the Ocean State’s debt per capita ranks 9th highest in the nation and debt in relation to personal income ranks 13th highest in the country.
Further, Fitch recently downgraded Rhode Island’s general obligation debt rating from AA to AA-, noting weakness in revenue collections and the state’s faltering economy.The FY 2009-2013 Capital Budget includes nearly $2.4 billion in revenue from current financing streams and $1.6 billion in debt issuance over the five year period. The financing plan includes approximately $470.9 million in general obligation debt during the five year period, including the referenda proposed this November (assuming all referenda are approved). RIPEC notes that recent market events will have an impact on borrowing requirements for the state. With the current challenges in the debt market, it is unclear what the impact will be on the state’s ability to access the market and at what cost. RIPEC has traditionally not taken positions on bond referenda questions.However, RIPEC encourages taxpayers to consider the following questions when deciding whether to authorize new debt in November:
- Which projects will result in investments that will strengthen the State’s economy and help grow and retain jobs?
- Do some of the proposed projects represent higher priorities than others given finite resources?
- What is the “opportunity cost” of these projects if they are not approved?
- Do the benefits outweigh the costs of the project when interest costs are taken into account?
- Will these projects help the State achieve its policy goals?
- What impact will new capital projects have on the cost of operating state government?
- What will be the impact of the current credit situation on the availability and cost of borrowing?