Fiscal risk seen in science bonds

Schools outside the UM system also want
to be included in the life science bond plan
Tuesday, January 13, 2004 | 12:00 a.m. CST; updated 12:45 p.m. CDT, Monday, June 30, 2008

Missouri Democratic and Republican lawmakers share the goal of boosting life sciences research in Missouri, but some Democrats say the University of Missouri’s proposal to use $190.4 million in bonds to meet the goal could put the state’s fiscal stability at risk.

Meanwhile, officials of other public universities in Missouri with life sciences said they want to be included in the plans.

MU Chancellor Richard Wallace announced the bond proposal two weeks ago and said it “is the highest priority for MU, for this community, and for our entire state.” The plan calls for construction and renovation of six health sciences and engineering facilities at the four University of Missouri system campuses using bonds authorized through the Missouri Health and Educational Facilities Authority. The plan would cost the state $11.6 million a year, beginning in fiscal year 2008.

Gov. Bob Holden’s chief of staff, Jane Dueker, said using $190.4 million in bonds could hurt the state’s bond rating, which would affect all Missourians in the long run.

“When the ratio of debt versus revenue gets spread too thin, your bond rate goes down and the cost of money goes up,” she said.

Missouri is among about 10 states nationwide that received AAA ratings from three bond rating agencies, which provide assessment of a state’s fiscal stability, Dueker said. The AAA rating is the highest credit rating category. High bond ratings lower the borrowing cost to the state; lower bond ratings can result in higher interest rates on bonds, which in turn, will mean additional costs to the people of Missouri, Dueker said.

Dueker said Holden and UM President Elson Floyd met last week to discuss the bond proposal.

“The president indicated he would give more information” about details of the plan, Dueker said.

Also, Sen. Ken Jacobs, D–Columbia, minority floor leader in the Missouri Senate, said the UM system’s funding plan needs further evaluation.

“The only time that we’ve done that in this manner is for the basketball arena,” he said. “That was an extraordinary situation of one person willing to pay $25 million and the university having $15 million in gifts from other people, so you can get a $75 million building for $35 million.”

Jacobs supported the use of bonds for the new MU basketball arena.

“When I stood up, Sen. (Wayne) Goode stood up and said, ‘You do this now, and they’ll be back and try to do it this way again.’ Here they are,” he said.

Sen. Wayne Goode, D-St. Louis County, was concerned about using bonds for the basketball arena and says he also has “some concerns about the approach” to expand MU life sciences.

“I don’t have a problem with the projects; I do have a problem with the process,” Goode said.

He said that new buildings usually go through the appropriation of the capital budget process, which would guarantee high scrutiny and the prioritization of the capital needs of the state.

UM officials don’t share those concerns. MU Executive Vice Chancellor Brady Deaton said for every dollar the state invests in life sciences projects, the university expects to raise $5 in federal and private funds. Senate President Pro Tem Peter Kinder, R-Cape Girardeau, said the plan is based on the experience with UM’s Endowed Chair and Professorship Program, which has attracted more than $90 million from donors to endow 120 chairs and professorships.

Jacobs criticizes UM for not telling Democratic lawmakers early enough about their bonds proposal.

“They took their plan to one group without taking it to the other. It’s just not the way to do this,” he said.

Also, Michael Stanard with the Missouri Health and Educational Facilities Authority, which would authorize the $190.4 million in bonds, said the university didn’t inform them about the project. But Stanard said that wouldn’t be a problem and would be not unusual, because “the deal is just in the initial stages.”

UM spokesman Joe Moore said the university would cooperate with everybody.

“We’ve been working hard to inform state officials about this project, and we will continue to do so,” he said.

In the meantime, officials of some two- and four-year institutions in Missouri said they also want to be included in UM’s bond plans.

Dave Rector, budget director of Truman State University, said there were some internal discussions among Missouri universities about the bonds plan.

“Life sciences seems to be the hot topic right now,” he said. “We have had the thought it ought to be for more than just the UM system.”

Central Missouri State University has two life sciences facilities that need to be renovated, said President Bobby Patton.

“We have a long-standing commitment in life sciences, and we have been in line to receive funding,” he said.

Patton said his university is in need of about $30 million to improve the conditions for life sciences research.

“We think life sciences need to be defined in ways that allow all of us to make use of the funds,” he said.

Patton plans to go to Jefferson City today to discuss the bond issue with Missouri legislators.

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