- Associated Press - Wednesday, March 12, 2014

LINCOLN, Neb. (AP) - A bill to allow bond financing for Nebraska road projects hit a roadblock Wednesday in the Legislature, with some senators arguing that the state shouldn’t abandon its debt-free approach.

Opponents launched a filibuster to block the measure, which would allow Nebraska to issue up to $200 million in bonds at a maximum, fixed interest rate of 5 percent. Lawmakers moved on to other scheduled bills before voting, but are expected to return to the issue next week.

Nebraska has used a pay-as-you-go system for decades, but supporters say the state could take advantage of low interest rates.

Sen. Annette Dubas of Fullerton said she introduced the bill to accelerate work on long-delayed projects. Just because the bill allows for bonding doesn’t mean state officials will automatically try to borrow the full amount, Dubas said.

“This is a tool available to them,” said Dubas, who leads the Legislature’s Transportation and Telecommunications Committee.

If the state did issue the bonds, the annual interest rates likely not would exceed 3 percent, Dubas said. Construction expenses are expected to grow faster, at about 5 percent per year, she said. Nebraska cities and counties already use bonds to pay for roads, and the state did so as well in 1968 to compensate for a delay in federal funding.

The bill was opposed by state Sen. Ernie Chambers of Omaha and other state lawmakers who questioned the use of debt to pay for the projects. Chambers called the bill a “boondoggle,” and noted that it was opposed by Nebraska Department of Roads officials. Department director Randy Peters told a legislative committee last month that work on many projects couldn’t start right away even if money was available.

“You’re going to borrow money you don’t need, so you can pay 2 percent interest on it,” Chambers said.

Sen. Tom Hansen of North Platte said he was concerned that the bill would open the door to more aggressive borrowing measures in the future. Hansen said future Legislatures could simply change the limitations on the bill. Seventeen lawmakers, including Dubas, are leaving office next year because of term limits.

“If we pass the idea of bonding the first time, it can be changed over and over and over every year,” Hansen said. “I think we’re asking for trouble.”

The bill was introduced three years after Nebraska officials passed a law that will divert an estimated $60 million to $70 million a year in sales tax revenue into roads projects. Dubas said the state still hasn’t met all of its road funding needs, but Nebraska now has a stable revenue source from sales taxes to help pay for them. She pointed to a 2013 Nebraska Department of Roads report that predicted $9.8 billion in needed projects over the next 20 years.

The bill was backed by a coalition of contractors, local chambers of commerce and Nebraska city and county governments. Last month, several supporters argued that it would generate immediate cash for the road construction, which grows more expensive over time because of inflation.

Sen. Heath Mello of Omaha said the bill would allow Nebraska to borrow money cheaply, and argued that it would still be one of the nation’s most conservative programs. Mello said the Department of Roads opposes the bill because the agency answers to Gov. Dave Heineman.

Heineman, a Republican, has made it clear that he opposes the idea.

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The bill is LB1092.

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