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Show IS EaGpaiiGnt: lapoe facte? n uian s constitution places a limit on the amount the state can borrow, the limit being one and one-half percent of the full cash value of taxable property in the state or five percent of the assessed valuation of that property IT APPEARS that after the 1978 bonds are sold (presuming (presum-ing the legal challenges are disposed of) a gap of approximately $80 million will exist between Utah's ac-. tual debt and the legal limitation. 'This fact may be viewed as both reassuring and disquieting by fiscal analysts." the Foundation states. "It reassuringly indicates in-dicates that Utah's fiscal position is reasonably sound and there is a legal debt . reserve to meet genuine emergencies should they arise. Repayment of bonded debt, in amounts of $10 million to $19 million a year, is expected to be a significant feature of Utah's budget over the next decade, according to Utah Foundation, the private, nonprofit non-profit research organization. UTAH'S FUTURE outlook on debt repayment differs from past experience in two important respects, the Foundation notes in a released this week: -For a number of years the expanding economy has produced substantial surpluses in state revenues, but it now appears that the era of surpluses is drawing to an end and Utah will no longer enjoy this financial cushion. -FOR A PERIOD of years Utah will be paying simultaneously simul-taneously on two different bond obligations, making annual an-nual dollar payments much larger than they have been in i he past. Total payments by the state (including both principal and interest) from 1979 through 1989 will be $173 million if legal challenges to bond authorizations enacted by the 1978 Legislature are resolved " and the bonds sold. Most of Utah's debt has been incurred to finance the program of building construction, although part of the borrowing borrow-ing authorized in 1978 would be for water development projects. "THERE WILL be significant sig-nificant additions to the cost of debt service in calculating the full impact of Utah's program of providing space for its agencies and institutions," institu-tions," the Foundation report notes. "Costs of operation and maintenance are high and will go higher each time a new building is completed and put to use. Even the latest bonding proposals cover only a part of the state's need for additional space and pressures pres-sures for additional construction construc-tion may be expected to develop and grow. IN ADDITION, Utah is leasing some 600,000 square feet of space in the Salt Lake area alone, and new buildings authorized under the 1978 , bond will only partially alleviate the situation." "THE SITUATION could be worrisome, however, if the legal margin were used 'because it is there' to meet political pressures for added spending. States which have kept their borrowing close to their legal debt limit have frequently found themselves .in serious trouble." After being free of debt pledging "the full faith and credit of the state" through most of its history, Utah' borrowed $67 million in 1965, $70 million more in 1975, and the 1978 Legislature authorized borrowing an additional ad-ditional $50.1 million. CHIEF ARGUMENT for borrowing is that the rate of inflation exceeds the cost of servicing a bond. While the present high rate of inflation in building construction continues con-tinues such a program appears ap-pears particularly attractive. If the rate of inflation should slow markedly, benefits to the state would be reduced and could even be reversed. Final payment on the 1965 loan will be made in 1980, and the first payment on the principal amount of the 1975 bond will be made shortly afterward. af-terward. Repayment of principal prin-cipal on the 1975 bond was delayed deliberately in order to avoid overlapping the 1965 bond repayment schedule, but this greatly increased the cost of the 1975 debt in interest and service charges. THE 1978 authorization provides that repayment of principal shall begin promptly to avoid excessive interest cost, and the State Bonding Commission has drawn up a tentative repayment schedule that would complete payment in 1989. Under their plan, repayment schedules on the 1975 and 1978 bond series will overlap. In view "of current conditions condi-tions and anticipated future developments, fiscal conservatives conser-vatives are urging Utah legislators to proceed with caution, to resist political pressures for unnecessary spending for building con-. con-. struction, to leave a reasonable debt margin to meet genuine emergencies which might arise, and to delay any i further non-emergency construction con-struction until Utah's fiscal position can be fully assessed in the light of the added 1978 obligations and the anticipated anticipat-ed end of the era of surpluses from existing sources of state ' revenue. |
