Monroe County pays more to avoid stimulus ‘risk’
Monroe County leaders are willing to spend an extra $1.2 million on a justice center project because they do not trust a federal stimulus program.
The county plans to issue bonds later this year to pay for a 137,000-square-foot justice center to be built in Sparta. This month, the county faced the decision of whether to use new federal Build America Bonds or to issue traditional tax-exempt bonds for the project.
The Build America Bonds, which were approved through the American Recovery and Reinvestment Act, are the cheaper option, but they are too risky, said Edward Westphal, a supervisor on the Monroe County Board.
The bonds, unlike traditional government bonds, are not tax-exempt. But the federal government gives municipalities annual subsidies to offset the higher cost. However, if Congress eliminates the program within the 20 years it will take the county to pay off its $30 million bond for the justice center, the county would end up paying more, Westphal said.
“I’ve never seen anything so absurd as the stimulus bond with the amount of risk it included,” he said.
Stevens Point became the first U.S. city to use Build America Bonds earlier this year when the city issued $3.65 million in bonds to pay for street, sewer and water projects, said Stevens Point comptroller/treasurer John Schlice. The city expects to save $240,000 during the life of the eight-year bonds by using the Build America program, he said.
Schlice said the city does not expect the federal government to revoke the program.
“If you can’t trust the federal government, who are you going to trust?” he said.
Art Jorgensen, attorney with Foley and Lardner LLP, Madison, said the annual rebates through Build America come as tax rebates, so Congress does not need to dedicate money to the program each year. Jorgensen, who consulted Stevens Point when it issued the bonds, also has closed bond deals for De Pere and Green Bay.
“I’ve heard of people who are hesitant,” he said. “In other words, they don’t trust the federal government.”
Jorgensen said the U.S. Internal Revenue Service is obligated to give municipalities the annual savings once the bonds are issued. Even without that guarantee, it would be politically unpopular to eliminate the program, he said.
“I think there would be a lot of political outcry if the federal government tried to reverse something that would help municipalities,” Jorgensen said.
Westphal said although the county plans to spend more than $1 million extra during 20 years in order to avoid using the Build America Bonds, it would be irresponsible to accept the risk if the program could be eliminated, saying, “I’m handling somebody else’s money.”