«RM75»«FC»COL202.PRB - Bond Issue Schemes
The recent arguments by Jay Nixon's administration that it can float bonds for an NFL football stadium without voter approval reminded me of other methods that have been used to avoid a public vote for a government debt.
When I started as a reporter, it seemed a simple issue.
Unlike the federal government, Missouri's Constitution prohibits deficit spending by state government.
So general obligation bonds require Missouri voters to approve a constitutional amendment authorizing the bond issue.
Beyond that, to assure that bond holders will get paid, the amendment provides for an automatic statewide tax if the state lacks enough revenue to meet the bond payments along with other constitutional budget requirements.
The one exception to the voter approval requirement, as I was taught in my government budgeting course, involved what are called revenue bonds.
The only guarantee for these bonds is the income generated by the project financed by the bonds.
Some public utility districts float revenue bonds financed by the fees for the utility service. Some public university dormitories have been built with revenue bonds financed by dormitory fees charged to students.
Because there is no obligation that government's own tax revenue will pay the bond holders, no public vote is required.
My first lesson as to how politicians can get around restrictions for a public vote for government debt came in 1979.
That year the legislature floated "revenue bonds" to finance a new government office building in Jefferson City.
The "revenue" would come from the money state government saved by no longer having to rent private office space for state agencies.
That scheme came under attack from the state auditor, Republican Jim Antonio, and was vetoed by Democratic Gov. Joe Teasdale. But the legislature overrode the governor's veto the next year.
The building is now called the Truman Office Building -- financed by taxpayer dollars paying off a state debt that never was submitted to Missouri voters.
Years later, the city of Moberly came under legislative attack for using a different approach to get money from a bond issue without voter approval.
The issue arose with the failed Mamtec project in which Moberly floated bonds to build a facility for a private company to locate in the city.
When the project failed in 2011, the city claimed it had no legal requirement to pay bond holders for the $39 million bond issue because Moberly never actually guaranteed payment.
Instead, the debt involved "appropriation bonds" in which the only guarantee was a non-binding promise that the city council would appropriate money for payments to the bond holders.
And without a legally binding requirement to pay the bond holders, no public vote was required.
Legislative calls for prohibiting "appropriation bonds" diminished when lawmakers learned that other towns were using the same tactic.
"Conduit bonds" is latest term I've heard for how government can issue bonds without voter approval.
That was the term used by Office of Administration Commissioner Doug Nelson when he recently explained to legislators how the administration could issue bonds for an NFL stadium without voter approval.
As he explained it, the stadium "conduit bonds" -- both the debt for the current stadium and the bonds that would be issued for a new stadium -- do not constitute an actual debt by the state of Missouri because the quasi-governmental St. Louis regional sports authority actually issues the bonds.
Missouri pays $12 million per year for bond payments. But the money is given to the sports authority as "rent" to lease the facility the state does not actually use.
Without an actual state legal obligation to pay off the debt, so the argument was made, Missouri is not required to seek voter approval.
I've since read that the term "conduit bonds" is used to cover a number of different schemes for government to issue bonds for private business projects under names such as industrial development bonds and private activity bonds.
[Phill Brooks has been a Missouri statehouse reporter since 1970, making him dean of the statehouse press corps. He is the statehouse correspondent for KMOX Radio, director of MDN and an emeritus faculty member of the Missouri School of Journalism. He has covered every governor since the late Warren Hearnes.]