Hevesi To Block Transportation Refinancing, Saying It Could Lead to Future Tax Hikes

ALBANY – For the first time in his three-year tenure, the New York State comptroller, Alan Hevesi, will block a refinancing plan for state highway and bridge debt, saying a new proposal to pay off nearly $3 billion in transportation costs increases the likelihood of future tax hikes because the payment of principal will be delayed for another five years.The proposal, recently approved by Governor Pataki and the state Legislature, is similar to mortgages that have become popular in recent years during a climate of low interest rates: Homeowners pay only interest for a number of years before chipping away at the principal. Such plans reduce early payments but inflate the payoff amount by increasing interest payments over time.Mr. Hevesi had warned lawmakers that this kind of arrangement in repaying state debt would meet his disapproval, issuing guidelines on debt issuance last July that described interest-only payment instruments as irresponsible and as contributing to the state’s titanic $46 billion debt load. By blocking the transportation refinancing plan, Mr. Hevesi is following through on the principals enumerated in that report.“This is not a refinancing to save money with lower interest rates,” Mr. Hevesi said. “It saves $1.3 billion in the short term by not paying any principal for five years, while increasing costs by $1.77 billion in the remaining 15 years. Our capital spending plan should be used to put construction workers to work, not to pay hundreds of millions in unnecessary interest.”The dramatic fashion in which Mr. Hevesi announced his refusal to endorse refinancing what is ultimately a small portion of the state’s five-year transportation budget raised questions as to whether the Democratic comptroller was reacting to a veto the previous day by Mr. Pataki of a bill that would have given Mr. Hevesi greater control over the state pension fund. Mr. Hevesi had hoped to increase to 25% from 15% the portion of the $115 billion fund that is free from investment restrictions.That bill, which would have given Mr. Hevesi investment discretion over an additional $11 billion in the retirement fund, would have increased his already considerable power over entities in which the state is invested. Mr. Pataki vetoed the bill on grounds that it would have exposed the fund to more risk. He proposed instead establishing an advisory board to oversee investments by the fund. Mr. Hevesi is sole trustee of the fund.Mr. Hevesi denied a tit for tat was at play. “This had nothing to do with that,” he said.The Pataki administration shot back at Mr. Hevesi’s rejection of the debt refinancing plan, with the acting commissioner of the Transportation Department, Thomas Madison, in a statement issued to reporters late yesterday, calling it “an eleventh hour power grab.”“The comptroller has exceeded his authority in blocking this transaction and is attempting to wrest policy-making control from the governor and the state Legislature, who jointly approved a five-year, $17.9 billion capital plan for New York’s transportation needs,” Mr. Madison said. “This capital plan maximizes the benefits of historically low interest rates and is consistent with our historic debt reform legislation which has helped us to achieve our highest credit rating in decades.”Mr. Madison said the action by Mr. Hevesi, who in blocking the proposal appealed to a state law that grants him limited powers to reject transportation authority borrowing, will result in the cancellation of future projects.“In light of the comptroller’s action, the state is forced to cease the awarding of future transportation contracts, pending a complete review of the overall Transportation Capital Plan and the funding available for priority projects,” Mr. Madison said. “The impact of Comptroller Hevesi’s decision will be felt immediately by all New Yorkers since it will jeopardize New York’s ability to attract and retain business and jobs that are critical to our future.”Anticipating the charge, Mr. Hevesi told reporters earlier in the day that his action would not result in the elimination of any current or future projects, as project funds are transferable and because a projected $640 million budget surplus could be used to plug a gap.“This $1.3 billion doesn’t mean a single project has to be postponed or canceled,” he said.

Hevesi To Block Transportation Refinancing, Saying It Could Lead to Future Tax Hikes

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