Local Gov’ts Seeking $66 billion in Bonds Nov 4, But Voters May Reject

There’s more at stake than just deciding the right man to lead the country on November 4; voters across the country also have to decide on whether they want to approve some $66 billion in municipal bonds.

The bonds will be used for schools, sewers and pet other projects in 41 states. In the current cash-strapped economy, states are requesting record-breaking levels of borrowing to finance construction and revitalization to public establishments and to upgrade technology.

California leads the way in municipal bond measures placed before voters, with almost $42 billion, the headline bond being a $9.95 billion issue that would fund a high-speed rail network. Columbus, Ohio wants $1.66 billion to be approved by voters. And a $300,000 bond will fund the Maryland Zoo and Meyerhoff Symphony Hall in Baltimore.

New York-based financial data provider Ipreo said the municipal bond total put before voters this year is the second-largest amount ever in a general election, after Nov. 2006’s total of $78.6 billion.

But officials are worried that the present economic state and the current overall fear of debt among the populace will push voters to select “No” for the bonds on their ballots.

John Matsusaka president of the University of Southern California told Bloomberg, “Voters are going to be nervous about borrowing in this economic climate. There's going to be general hesitancy to take on new projects when individuals and governments are having financial difficulties.'' 

And it’s not just municipalities asking voters to approve debt, states are also requesting money from their citizens. According data compiled by Ipreo and Bloomberg News, Alaska, Arkansas, California, Maine, New Mexico, Ohio, Pennsylvania and Rhode Island residents are to vote on 15 statewide bond proposals totaling $18.6 billion.

As the economy sours, governments are taking in less money in tax revenue, necessitating debt spending to fund projects.

But the bonds themselves have been difficult to issue, hindered by the credit crunch. Tighter credit conditions crimped issuance this year, as states, cities, colleges and hospitals focused on refinancing debt with variable rates or struggled to attract buyers, which moved total government bond sales down 9 percent to $328 billion.