New wave of Higher Ed bonds gain approval from state Council of Bond Oversight
Published: May 10th, 2012
The Oklahoma state Council of Bond Oversight has approved a cluster of proposals today allowing issuance of bonds by the Regents for Higher Education and the Water Resources Board.
Concerns about the state’s bonding provisions have been raised by Senator Patrick Anderson of Enid, a Republican.
At its afternoon meeting today (Thursday, May 10), the council approved to allow the Higher Ed Regents to “enter into Lease Purchase Agreements with the Oklahoma Development Finance Authority” (ODFA) to secure some $40,385,00 in lease revenue bonds. Those bonds are part of a broader package worth at least $200 million.
According to an update on the Council’s website, Gov. Fallin has appointed two new members to the Council, effective September 27: Gary C. Huckabay and R. Marc Nuttle. The pair await state Senate confirmation.
The five members of the council include the director of the Office of State Finance, two members chosen by the House Speaker, and one member appointed by the President Pro Tem of the Senate.
On Thursday, two items were approved for the Water Resources Board. One allows issuance of $70 million in “Fixed-Rate and Tax Exempt Revolving Fund Bonds.” The second allows OWRB to issue $22 million in “Fixed-Rate and Tax Exempt New Money Revenue Bonds for the State Loan Program.”
Also approved, for the Oklahoma Development Finance Authority, was $8 million for the state’s “Economic Development Pooled Finance Act Taxable Revenue Note” for a project listed on Thursday’s meeting agenda as for the “International Paper Company.”
Senator Anderson has requested an attorney general’s opinion on constitutionality of the “Master Lease Personal Property and Real Property Programs.”
Anderson said these programs for the state colleges and universities are disturbing because they are not approved by either the Legislature or voters. They are funded with student fees and tuition. Also in question, from Anderson’s perspective, are bonds for the River Parks Project.
According to James C. Joseph, the state Bond Advisor, “The proposed obligations are neither an indebtedness of the State … nor the ODFA, but are limited obligations payable solely from the sources specifically pledged to their payment.” Joseph highlighted this foregoing language on a memorandum, dated today, provided to members of the Council.
Joseph’s memo specified six conditions to the bond issue approval, notably including “resolution of all legal questions … to the satisfaction of Bond Counsel, Underwriter’s Counsel and the Attorney General.”
In a statement to reporters Thursday, Anderson asserted, “I believe there are some fundamental flaws in the manner in which the Master Lease programs have been established and are operated that make them unconstitutional. The original purpose of these programs was to allow colleges and universities to save money when purchasing copiers and computers, but has now ballooned to annual multi-million dollar requests.
“I believe that our State Constitution requires that the people of the State of Oklahoma vote to approve this debt or, at the very least, it should be required that the Legislature vote to approve these projects.”
In 2010, projects in the Master Lease Real Property program totaled $102.7 million, Anderson said. The following year, the total was $131 million. In 2012, project requests will total $250 million, Anderson projected.
Anderson contends, “The amount of debt being proposed in the real property program has increased exponentially over the last few years. While not all requested programs are funded, there appears to be no maximum limit to the cumulative total of the debt that is being incurred under this program. This is not right or fiscally responsible of the Legislature to allow this to continue.”
The programs approved today for bond refinancing included two for Langston University ($2.6 million and $5.23 million), Northeastern State ($3.16 million), Northern Oklahoma College ($1.825 million), Oklahoma State University ($18.11 million), Seminole State College ($3.05 million) and the University of Central Oklahoma ($1.57 million).
Previously, Anderson opposed intentions to use the Master Lease programs to build a new Medical Examiner’s office, rather than going to the Legislature for consent. He said:
“It stretches one’s imagination to claim that a new building for the State Medical Examiner should be funded through the Regents for Higher Education. Furthermore, the building that they are proposing to build is the size of a football field at a cost of nearly $1,000 per square foot.
“My fear is that if the door is opened to allow legislators to add projects to the Master Lease program then there will be no stopping the abuse that will be sure to follow. If this abuse is allowed to continue then next year we will probably see the University of Oklahoma Native American Culture Center or the Tulsa Community College Pops Museum.”
“It appears at this point that the State’s Attorney General is the only person who can protect the taxpayers of Oklahoma from these continued abuses. I am hopeful that Attorney General [E. Scott] Pruitt, as a fellow constitutional conservative, will agree with me that the Master Lease programs are unconstitutional and that these bond issues should be required to be approved by a vote of the people of Oklahoma.”
State Rep. Jason Murphey of Guthrie, tried unsuccessfully in March to restrain the Master Lease Program’s bonding powers for the ME’s office at UCO. A House panel rebuffed Murphey’s effort.
More favorably inclined to the ME bond than Anderson or Murphey is state Sen. Clark Jolley. Earlier this session, he told Oklahoma Watchdog’s Peter J. Rudy, “The best plan would be for us [the legislature] to write a check. Plan B would be to have a bond issue that this Legislature votes to approve for the Medical Examiner and for the Medical Examiner to be able to build their own building.”
However, state House leaders have said repeatedly that only a state Capitol repair bond issue is likely to pass this year. Speaker Kris Steele reiterated that in Thursday’s session with Capitol reporters, echoing what Senate President Pro Tem Brian Bingman had said earlier in the day.
Sens. Jolley and Anderson have jousted over bond issue authority over the past two years.