Everything you ever wanted to know about the bonding bill but were afraid to ask
After a two-year hiatus on construction borrowing, DFL leaders at the Minnesota Capitol said they’re determined to get a capital investment bill — or even two — across the finish line this year.
With a hold on all three levers of power at the Capitol and a whopping $17.6 billion projected budget surplus, Democrats will have a broader range of opportunities to chart new tax and spending bills. And they’ll also have more options when it comes to writing and passing a capital investment bill in 2023.
Before the next Legislature takes office next month, here’s what you need to know about the push to invest in local projects.
What even is a bonding bill?
A capital investment, or bonding, bill is a package of state agency and local infrastructure projects that lawmakers agree to fund, at least in part, with state money. The funding can come from cash that the state has on hand, or more typically, from money the state borrows by issuing bonds, which are purchased by investors.
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Historically, legislators write a bonding bill every other year. But recently political gridlock at the Capitol has prevented that. The most recent bill to pass got across the finish line in October of 2020, after Republican lawmakers stonewalled it due to frustration about the ongoing COVID-19 state of emergency.
The bills fund a variety of construction projects from new buildings at public colleges and universities, to fixing leaky roofs on other government buildings, and building new water systems and wastewater treatment plants.
Why is it tricky to pass?
Unlike most bills that take a straight majority vote to pass, measures that commit the state to take on debt require a three-fifths majority, as laid out in the Minnesota constitution. That means bonding bills usually require buy-in from both parties, which gives the minority party special leverage.
“It's probably one of the most problematic, contentious and confusing bills that you'll ever pick up,” said Rep. Jim Nash, a Waconia Republican, “Because if you pursue a non-cash bonding bill, you have to have a 60 percent vote off the floor. And that creates some interesting dynamics, a lot of elaborate promises and arm twisting and so on.”
Can a bonding bill make it through the Capitol this year?
With Democrats set to hold the “trifecta” at the Capitol and with a boatload of budget surplus dollars, the prospects for a bonding bill are bright.
House Speaker Melissa Hortman, DFL-Brooklyn Park, said lawmakers have put off passing a bonding bill for too long. And because of the $17.6 billion projected budget surplus, Democrats could pass one with or without GOP buy-in.
“We do have enough cash — one-time cash — that we could consider doing a cash-only bonding bill that wouldn't depend on super majorities, so that we can ensure for the people of Minnesota that we would get a bonding bill done,” Hortman said. “If that's what we need to do to surmount a Republican roadblock, that's what we'll do.”
Incoming legislative leaders and Gov. Tim Walz said passing a bonding bill will be a top priority as they kick off the 2023 legislative session. And they’re likely to propose the largest bonding bill in state history because inflation and delays in getting projects off the ground have hiked the prices on many projects.
“It's never good to skip a year because the infrastructure needs in our state just keep growing,” said incoming Senate Capital Investment Committee Chair Sandy Pappas, DFL-St Paul. “It's not like the costs are going to go down in the future, so we might as well just bite the bullet and pay for these things that are so essential for our state.”
Where do Republicans stand?
Republicans at the Capitol said they’re open to reviving the bonding bill considered earlier this year or working on a new one. And with new leaders set to helm the House and Senate GOP caucuses, DFLers could have partners more willing to cooperate.
Incoming House Minority Leader Lisa Demuth, R-Cold Spring, said she hopes to collaborate with Democrats to get a capital investment bill that can benefit the whole state. She laid out a list of what she’d most like to see in that package.
“I think it's important to prioritize our roads, our bridges, our infrastructure, you know, wastewater treatment — those basics of bonding are what we would like to see,” Demuth said.
Demuth and other GOP leaders said they too are open to a cash-only bonding bill. And some said it was a better option, since interest rates could make borrowing a pricier prospect.
“If we've got the cash on hand, I'd rather see us utilize that to make these investments rather than borrow at high interest rates, which is only going to cost us even more money over time,” said Sen. Zach Duckworth, R-Lakeville.
Why borrow instead of paying cash?
Borrowing to pay for long-term and large-scale projects helps the state spread out costs over time, instead of having to pay a large sum all at once. And that helps keep cash on hand available for other expenses.
It also spreads costs to Minnesotans who might be using the projects well into the future.
How does the bill get put together?
Before legislators start drafting a capital investment bill, they put a request out to cities, counties, state agencies and other groups to tell them about projects they’d like to get state help on.
Typically they hold dozens of hearings during the legislative session, giving local leaders a chance to make the case for their projects and they also deploy around the state to see some of the buildings, parks or roadways in person.
Last year, the state had a list of proposals that totaled more than $5 billion. And after failing to pass a bonding bill earlier this year, that price tag is expected to grow.
Not only have additional projects come into the queue, but additional deferred maintenance and inflation have ballooned prices on some construction projects by 20 percent.
“That total cost is just going to go above and beyond that $5 billion,” said House Capital Investment Chair Fue Lee, DFL-Minneapolis. “The faster we can move on this so that we could clear up the queue, so that we can start considering new projects, the better.”
How soon will work on a bill start?
Lee and Pappas said they have committee rooms blocked off and are ready to start holding meetings next month. They’ll have people from around the state present their proposals in person or over Zoom and then go out to check out proposed construction sites.
Pappas said she hopes they can get a bill done and avoid disappointing some of those they’ve turned down year after year.
“Frankly, I've been on the bonding committee for over a decade. And it's embarrassing to continue going back to these communities and hear about their projects, and then having never funded them,” she said. “Now we need to fund them and have them off our list.”
Who wants to get it done?
Look no farther than Owatonna.
City leaders there were counting on lawmakers to green light their $22 million request last spring to help pay for an expansion of the city’s wastewater treatment plant. When that fell by the wayside, they had to increase fees.
City Councilor Kevin Raney said he hopes the Legislature can move quickly to pass the funding, along with money for projects around the state.
“Without the bonding bill, it's costing all of our taxpayers a lot more money,” Raney said. “If they can make that bonding bill happen this year, we can come back and we can reduce that fee again, which would be a great win for our community.”