March 21 (Reuters) - Rhode Island’s cash-strapped cities could get help financing road and bridge repairs under a discounted state revolving loan fund proposed on Thursday by state Treasurer Gina Raimondo and state lawmakers.
The proposal would expand the triple-A rated, quasi-public Rhode Island Clean Water Finance Agency, allowing it to make low-interest loans to local governments for road and bridge projects in addition to the water projects it already finances.
Virginia, Kansas and Ohio have similar programs, according to Raimondo’s office.
The legislation, which is still being drafted, comes as cash-strapped state and local governments across the United States search for ways to finance trillions of dollars of improvements in the nation’s aging infrastructure.
Rhode Island’s plan calls for initial new investments - up to an estimated $70 million over the next two decades - from the state or potentially from private sources, Raimondo told Reuters. No new borrowing is anticipated, she said.
Most likely, lawmakers would appropriate start-up funding from the state budget. Rhode Island House Speaker Gordon Fox presented the proposal along with Raimondo.
The plan would create a new Municipal Road and Bridge Revolving Fund to be administered by the water agency. Once the new fund is active, it would be self-sustaining as cities pay back the loans with interest, she said.
Details of the size of the program and how much it would loan out annually were still being hashed out.
Many of Rhode Island’s more urban areas - East Providence, Woonsocket and North Providence, to name a few - are struggling financially. With lower credit ratings, they must pay higher interest rates when funding capital improvements.
“Their bond ratings and overall fiscal situations make it extremely difficult and expensive to access the bond market,” Raimondo said. “This is a tool for municipalities to get a discount on their borrowing.”
For example, Providence, the state capital, avoided bankruptcy last year and has brought what was a $110 million structural budget gap in 2011 down to $4 million.
The city is rated Baa1 by Moody’s Investors Service. Such triple-B rated issuers could save an estimated $1.2 million for every $10 million they would borrow through the new revolving fund rather than through the markets, according to the proposal.
Raimondo, a Democrat who spearheaded sweeping pension reform last year, is expected to run for governor against current Governor Lincoln Chafee, a political independent who is up for re-election in 2014. Both houses of the state’s General Assembly are led by Democrats.
To become law the bill will must be approved by the Rhode Island General Assembly and signed by Chafee. The governor needs more details before deciding whether to support the proposal, a spokeswoman said.
The Rhode Island Clean Water Finance Agency has about $450 million of revenue bond debt outstanding.