CHICAGO - Ohio officials are considering a major revamping of the state's debt-issuing practices that could include the consolidation of some authorities and the use of general obligation debt instead of lease debt.
A recently completed debt management plan, commissioned by the Ohio Office of Budget and Management, contained those and other recommendations, including limiting the state's direct debt capacity and requiring debt-issuing authorities to have written debt management practices and policies.
The report is part of an effort by Gov. George Voinovich, who took office in January 1991, to review the state's debt-issuing practices to see if they are conducted in "the most efficient and effective manner possible," said Paolo De Maria, the state's assistant budget director.
Some recommendations would need voter or legislative approval for implementation, De Maria said.
Voter approval would be needed for a change in the state constitution that would allow Ohio to issue GO debt in place of lease debt.
If GO bonds replaced lease debt issued by the Ohio Building Authority and the Ohio Public Facilities Commission beginning in 1994, the plan says, the state could save about $75 million to $82 million over the next 20 years.
The savings would come from the interest rate differential between the double-A-rated state GO debt versus Moody's A rating and Standard & Poor's Corp.'s A-plus rating on the lease debt, according to the plan.
Legislative approval would be needed to place the measure before voters, De Maria said.
The plan also recommends consolidating some state debt-issuing authorities mainly to save money and improve staff expertise. There were 16 different bond-issuing agencies in Ohio that had a combined total of $12.7 billion of outstanding debt as of June 30, 1992, according to the plan.
One suggestion in the plan calls for consolidating agencies that issue the same type of debt, like the state treasurer's office and the Commissioners of the Sinking Fund, which are both empowered to issue GO debt; and the Ohio Building Authority and the Ohio Public Facilities Commission, which both issue lease debt.
The plan also lists consolidating debt management staff members as an option.
In addition, the plan calls for limiting the amount of direct state debt to within 20% of Moody's Investors Service's medians for all states on a per capita and personal income basis. The plan indicates that Ohio is 9.1 % above the Moody's median for debt as a percentage of personal income and 13.5% above the median for direct debt per capita.
"We see it as an affirmation of some of the policies and limitations we imposed on ourselves," De Maria said.
The plan also recommends that state issuers should develop written debt management practices and policies that could cover such things as selling debt through competitive or negotiated sales and the selection firms to handle debt issues.
None of the authorities currently have written policies, and it would probably be a good idea to have clear procedures to follow, De Maria said.
He expected to have the report's authors - Evensen Dodge Inc. and Chase Edwards & Associates Inc., which are both financial advisory firms - talk to legislators about the report sometime later this summer or in the fall.
"The [Office of Budget and Management], the governor, and the legislative leadership will have to look at the plan and decide how to move down the road." De Maria said.
Kent Carson, a spokesman for House Speaker Vern Riffe, D-Portsmouth, said the speaker is interested in the plan and is in the process of studying it. An aide to Senate President Stanley Aronoff, R-Cincinnati, could not be reached for comment.
Officials at many of the state's bond-issuing authorities said they either have not received a copy of the plan or have not read it in detail.
"I thought it was a thoughtful study, but we haven't analyzed it in terrible detail." said Paul Goggin, executive director of the Ohio Building Authority.
At least two of the authorities are about to issue debt for the first time ever or for the first time in many years. The Petroleum Underground Storage Tank Release Board is planning its first issue ever a $25 million taxable bond issue backed by tank owner fees, next month to clean up contaminated soil and water. The Ohio Turnpike Commission is planning its first issue since 1952 - a $100 million to $125 million bond issue backed by toll revenues for later this year.
Jim Summers, assistant director of investment in state Treasurer Mary Ellen Withrow's office, said the treasurer would not support any movement to remove her office's participation in state debt issuance.
The treasurer, who has issued $480 million of the $1.2 billion of GO debt for infrastructure improvements approved by voters in 1987, is also a member of the Ohio Public Facilities Commission and the Commissioners of the Sinking Fund. State officials have recently proposed a $200 million GO bond issue for park improvements that would be issued by the sinking fund if approved by voters on Nov. 2.
The debt management plan indicates that some of the recommendations would be viewed as positive by rating agencies.
James Dearborn, an assistant vice president at Moody's, said the rating agency has no position on how the state should issue its debt.
"The fact [the state] commissioned a study can only be considered a positive," Dearborn said. "What they do in terms of the recommendations is up to them."
An official at Standard & Poor's did not return phone calls.