Jeff Gudman for State Treasurer
Infrastructure and Bonds
Oregonians — particularly working Oregonians — spend a significant portion of their lives on or using public infrastructure. From the streets and highways and mass transit they use to commute, to the pipes and electric grid that keeps their home liveable, to parks where they recreate, it is important that we not only invest in new infrastructure but continue to ensure that new projects and maintenance of existing infrastructure are deployed in a way that is equitable to all Oregonians. Here are a few ways we can improve our infrastructure financing as well as our deployment:
Reauthorization of Tax Subsidy Bonds
Tax subsidy bonds were authorized by Congress as part of the American Reinvestment and Recovery Act. From 2009 to 2010, these bonds allowed states and other municipal bond issuers the option to recover interest savings through an immediate subsidy from the federal government (either with a direct payment or through tax credits) rather than through lower rates by virtue of a federal tax-exemption on investors’ earnings. Since the federal government still taxes interest on subsidy bonds, it's a wash for the federal budget, but allows state and local issuers to access capital markets much more efficiently. The option of accessing new taxable and foreign capital markets allowed many states to sell to a wider pool of buyers and experience record low interest rates. Even states that did not issue tax subsidy bonds saw lower interest rates due to a relieving of pressure on traditional tax-exempt bond markets. CNN reported in 2010 that issuers were seeing lower rates of up to 40 basis points (0.40%) attributable to the program. If we were able to re-authorize those bonds and re-open those capital markets, Oregon could expand its scope of infrastructure projects without cutting costs or raising taxes.
Appropriate Bond Prioritization
As Chair of the State Debt Policy Advisory Commission, the State Treasurer has significant influence over identifying debt capacity, but has historically not attempted to prioritize or value certain projects. As Treasurer, I would assemble a Debt Prioritization Advisory Committee to help the Treasury provide a framework to the Legislature on how to ensure the best, highest, and most equitable use of that debt capacity, in order to help prioritize the kind of small but important projects that are often ignored (such as wastewater projects in smaller cities or unincorporated areas).
More Equitable Funding Mechanisms
I will urge the Legislature to examine ways of reforming or replacing our gas tax, possibly with a Vehicle-Mile Assessment, to address the growing inequity of owners of newer, electric cars paying less than their fair share. A captive tolling plan, however, where lower-paid shift workers and residents in areas without reasonable transit options are forced to pay tolls to subsidize regional projects, is not a fair alternative.
Debt Buyback Program:
Taking advantage of high interest rates to extinguish some debt at lower rates.
Currently: With interest rates high, many private sector lenders are looking for opportunities to extinguish their outstanding low-interest loans so that the money can be loaned out at a higher rate. At the same time, Oregon has billions of dollars of prudently-managed debt being slowly paid off, but which might be able to be settled now for a lower interest rate. This would free up additional debt capacity.
Jeff's Plan: When the State has available capital, the State Treasury should evaluate whether it makes sense given the interest rate environment to buy down the State’s debt at an advantageous rate, as creditors look for available capital.
Sometimes, it might not make sense. But when it does, the freeing up of that debt capacity provides advantages to the State budget as well as other infrastructure needs. If we have infrastructure needs, we might not want to use that freed up capacity while interest rates are high, but the option exists and we’re no worse off. More importantly, the state budget is released from making associated debt service payments on that borrowing, which frees up money that could be applied to any number of programs or projects.
Think of it as a way to refinance in a high interest rate environment by negotiating with our creditors in exchange for an influx of capital.
Given the amount of capital required, this is not likely to be a common occurrence, but in scenarios where the kicker is expected to provide billions of dollars of surplus while interest rates are high, this approach should be on the table for consideration by the Surplus Advisory Committee described previously.
Thanks for reading. This is an example of the kind of transparency and engagement you can expect from Jeff Gudman as State Treasurer!
Paid for by Friends of Jeff Gudman | PAC 17431