University Times

Pennsylvania will borrow $650 million through a bond issue that is expected to fulfill through mid-year the state’s financial obligations to capital and economic development projects under contract.

Gov. Edward G. Rendell had proposed borrowing $1 billion but state treasurer Rob McCord and Auditor General Jack Wagner refused to authorize that amount. McCord on Dec. 9 announced he would approve borrowing $650 million.

State law requires that either the treasurer or the auditor general agree with the governor in order to authorize the issuance of public debt for such projects. McCord also sought input from governor-elect Tom Corbett, whose term begins Jan. 18.

In a prepared statement, McCord said, “A billion dollars in debt would not have been appropriate, and I will not approve such an offering.

“But neither, in my judgment, would it be appropriate to issue zero debt, and in so doing risk a winter shutdown of ongoing infrastructure-improvement projects — job-producing projects that are an important component of our fragile economic recovery.”

According to the treasurer’s office, during the past four changes in administration, bond issues that took place within two months of the transition averaged $299 million, and ranged from $208 million to $500 million.

Prior to the agreement, Rendell expressed concern that projects would be shut down in the absence of additional funding.

“No one wants ongoing projects to stop,” McCord said. “But we also must be appropriate stewards of the state’s resources. This offering is right-sized to address those shared concerns.”

McCord projected that $650 million would fund the projects that are underway into June. He stated, “The cash on hand to fund already-approved projects will be depleted by early February. It is important we have cash to continue funding those projects. But there was no need to borrow $1 billion all at once. If we had done that, we would have been sitting on money and paying interest as we did so — losing more money than necessary with what financial executives call ‘negative carry.’”

Pitt has three capital projects that are being reimbursed through the funds: Chevron Science Center, budgeted for $25 million in state public improvement account capital funds; Benedum Hall, budgeted for $69 million in state funds, and Salk Hall, budgeted for $50 million in state funds.

—Kimberly K. Barlow