Magazine article American Banker

Comptroller: N.Y. Using More Debt for Capital Projects

Magazine article American Banker

Comptroller: N.Y. Using More Debt for Capital Projects

Article excerpt

Byline: Ted Phillips

New York's capital projects were financed with debt for 56% of the costs in fiscal 2010 compared to 42% in fiscal 2001, according to a report released Tuesday by the state comptroller's office.

At the same time, a focus on short-term needs rather than long-term capital planning has left New York with a higher-than-average number of transportation assets in poor condition, according to the report, "Planning for the Long Term: Capital Spending Reform in New York State."

"New York has to stop its haphazard approach to capital projects," Comptroller Thomas DiNapoli said in a release. "There must be a unified assessment of the state's long-term capital needs to prioritize projects to ensure access to clean, safe drinking water and protect roads and bridges from closing or collapse."

Since fiscal 2001, new bond issues have increased annually by 10.3% on average.

Though the state's fiscal 2011 capital program projects that the use of bonds will decline over the next five years, bond financing historically has exceeded projections, the report said.

Gov. David Paterson's fiscal 2011 budget reduced bonded capital spending by $1.8 billion over a five-year period to reduce annual debt service by more than $130 million. Without the reduction, the state expected it would breach its debt cap by fiscal 2013.

The state Division of Budget projects that by fiscal 2013, pay-as-you-go capital spending will exceed bond financed capital spending, 54% to 45.8%. DiNapoli's report is skeptical of those expectations.

It said the state has used a recurring strategy of projecting growth in pay-as-you-go capital spending while reducing reliance on debt in out years, but then using more bonds when the time comes to actually spend.

"If future debt issuances continue the historical pattern of exceeding projections, the state may once again find itself bumping up against its debt caps," the report said. …

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