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Hevesi
Blocks Transportation Borrowing Plan
By AL BAKER
and MICHAEL COOPER
July 22,
2005
NEW YORK
TIMES
ALBANY,
July 21 - State Comptroller Alan G. Hevesi Thursday canceled
the Pataki administration's plan to refinance $2.9 billion
worth of transportation bonds. The move cast doubt on part of
a multibillion-dollar plan for transportation projects across
the state and signaled the comptroller's resolve to curb the
state's expensive borrowing habits.
The
comptroller's decision led the Pataki administration to stop
awarding new transportation contracts throughout New York
until the state's entire transportation plan could be
reviewed, and state transportation officials called Mr.
Hevesi's move "an 11th-hour power grab."
In canceling the scheduled pricing of the bonds on Wall
Street, Mr. Hevesi, a Democrat, said the deal originally
proposed by Gov. George E. Pataki, a Republican, would have
broken a basic rule of prudent financing: it would have added
huge costs in future years in exchange for limited savings
today. His aides said it was akin to paying interest only on a
house mortgage without paying down principal.
But officials in the Pataki administration questioned Mr.
Hevesi's numbers and said he was overstepping his authority by
wrongly trying to seize policy-making control from the
governor and the Legislature, an accusation Mr. Hevesi
disputed. The administration officials charged that the
comptroller's move would prove "potentially devastating" to
the state's vast transportation network.
The ensuing battle over the debt cast some doubt on the
state's ambitious plans to spend $35.8 billion on
transportation projects over the next five years, with half
the money going to improvements to roads and bridges and other
parts of the transportation system across New York, and half
going to projects at the Metropolitan Transportation
Authority.
The Pataki administration wanted to refinance old
transportation bonds and use the short-term savings - $1.3
billion over the next five years - to help pay for a $17.9
billion plan to improve roads and bridges across the state.
But Mr. Hevesi warned that those upfront savings would come at
a cost: large payments would come due beginning in 2011,
burdening future taxpayers with an additional $460 million in
debt service. So, after months of warning, he moved to block
the plan.
Senior Pataki administration budget officials disputed his
analysis and said that by their count, the refinancing would
save $30 million.
On one side, aides to the governor said that without the
money, the five-year plan would have to be rethought, at least
regarding how it is paid for, even though it had just been
completed after delicate and complicated talks among lawmakers
with competing interests. The governor's budget director, John
F. Cape, said in an interview that the comptroller's move
could complicate a separate $2.9 billion transportation bond
act that depends on voter approval in November, because some
projects it would pay for are tied to the overall five-year
plan.
On the other side, Mr. Hevesi and Assembly Democrats stressed
that the $1.3 billion - spread over five years - was a
relatively small portion of the overall transportation plan,
and that the state has five years to make up the difference by
spending the surplus it is projecting this year, spending
reserve funds or refinancing the debt under better terms,
among other options.
"Some people will be tempted, and I'm anticipating this, to go
public and say there's a series of projects that will be
killed as a result of the actions we're taking," Mr. Hevesi
said. "If somebody tells you that, you can look them in the
eye and say, 'It's not true.' "
His move to block the sale reverberated in Albany, while
lawmakers were on vacation for the summer, and stirred an
increasingly contentious feud between the governor, a
three-term Republican who is nursing national presidential
ambitions, and Mr. Hevesi, who is increasingly flexing his
legal power over financial issues in the state and is
politically aligned with the man who wants to replace the
governor, Attorney General Eliot Spitzer. (Mr. Pataki vetoed a
bill Tuesday that would have given Mr. Hevesi greater
flexibility in investing the state's pension funds.)
It is the first time that Mr. Hevesi, who has repeatedly given
warnings about the state's debt load, has stepped in to stop a
bond sale.
The state's acting transportation commissioner, Thomas J.
Madison Jr., and the executive director of the State Thruway
Authority, Michael R. Fleischer, issued a joint statement
claiming that the comptroller's action would "jeopardize New
York's ability to attract and retain businesses and jobs that
are critical to our future."
Financial watchdogs praised Mr. Hevesi's move. Edmund J.
McMahon Jr., director of the Empire Center for New York State
Policy, part of the Manhattan Institute, a conservative policy
research group, said it would amount to "yanking the rug out
from under" the state's overall transportation plan, which he
said should go "back to the drawing board."
"In pragmatic terms, I think it will cast a pall over the bond
act and the entire capital plan, and it should," Mr. McMahon
said. "The reason the Legislature and the governor resorted to
this questionable tactic is because the plan has got more in
it than they can afford."
But Mr. Hevesi said he favors the bond act that goes before
voters in November and repeatedly stressed that his action
would not imperil it. But given the sensitivities involved -
the insistence of upstate lawmakers that all money for the
Metropolitan Transportation Authority be matched in spending
on upstate projects - a change to any one part of the plan
could ripple through the entire process.
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