newsminer.com

JUNEAU, Alaska -- Hundreds of millions of dollars in transportation projects will be decided on Nov. 4 in a bond measure that's rolling under the radar in the hoopla over national and statewide races.

Alaska voters must decide whether the state should incur $315 million in debt to pay for two new bridges and road and bridge repairs across the state.

State lawmakers approved the general obligation bond package last April in one of the last actions of the 25th Alaska Legislature.

State revenue officials say the bonds would likely be repaid over a 20-year amortization period, which would come to just under $26 million annually at current interest rates of 5.3 percent. Legislators last spring were anticipating interest rates closer to 4.5 percent.

Gov. Sarah Palin originally proposed a much smaller road bond package, but lawmakers piled on more projects, saying they wanted to kept the capital budget down and give voters a chance to weigh in. The measure is sprinkled with improvements around the state to broaden voter appeal.

Some lawmakers objected to the measure. Rep. Carl Gatto, R-Palmer, said the state should pay for the more than two dozen projects with cash instead of saddling future generations with the debt.

The state is currently flush with surplus revenues from high oil prices and a boost in the oil production tax but those prices have fallen precipitously in recent weeks and production is in steady decline.

Rep. Kevin Meyer, R-Anchorage, said the package includes much needed infrastructure and safety improvements. He said the bonds make fiscal sense because the state is likely to earn more by investing the cash than it would pay out in interest, even with the market downturn.

"Over time, on average, you figure you will earn 8 percent on savings," he said. "I know that's hard to believe now, but when you look at it over a 20-30 year period like the length of this bond, that's what it should average out to be, so it should be a good use of our money."

Despite the current turmoil in the credit market, state officials and lawmakers expect the tax-exempt bonds would be attractive to investors.

"There's a lot of money out there and it needs places to go that are very credit stable," said Sen. Bert Stedman, R-Sitka. "Solvency-wise, we are probably one of the better credit risks in the world right now."

The state Treasury Division's debt manager, Deven Mitchell, said the road bonds are a manageable amount of debt for the state. The state's credit rating is currently AA+ under Standard and Poors, but those assessments tend to underrate the public sector, he said.

Other state obligations, which are not subject to voter approval, include $256 million for construction of the Goose Creek Correctional Facility in the Matanuska Susitna Borough and $25 million for expansion of the Spring Creek Correctional Facility in Seward.

The state is also considering selling up to $2 billion in pension obligation bonds this year to help pay down the state's unfunded liability in its retirement systems, but Mitchell said that may have to wait until interest rates drop on the pension bonds. The plan depends on earning a higher investment return than the cost of interest on the bonds and using the difference to pay down the retirement systems' debt.

While some states are having trouble just covering their day-to-day bills with the municipal bond market squeeze, that's not the case with Alaska, which has vast cash reserves socked away in savings accounts, including $29 billion in the Permanent Fund and $7 billion in the Constitutional Budget Reserve.

Most states have no more than three months of reserves set aside, said Mitchell.

Some of the projects in the transportation package before voters include:

- $20 million for the Wood River bridge in Aleknagik

- $10 million for the Snake River Bridge replacement in Nome

- $20 million for emergency bridge repairs statewide

- $30 million to widen University Avenue in Fairbanks

- $22.1 million for the Connect Anchorage Project

- $20 million for safety improvements on Seward Highway

- $15 million in Steese Highway improvements

- $14 million in Dalton Highway improvements

- $13 million in Glenn Highway improvements

- $11 million for rehabilitation work on the Sterling Highway

- $10.8 million in improvements to Sawmill Creek Road in Sitka

- $15 million to eliminate the weight restriction on the Parks Highway

- $8 million in Kenai Peninsula Borough road projects

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Information at: http://www.elections.alaska.gov/Documents/TransportationBond-HB314.pdf