CHARLESTON, W.Va. — Several times over the past few months, Jim Justice has talked about gathering a pot of millions of West Virginia dollars, leveraging it through investment firms and coming out on the other side with more than a billion dollars to be used for investment.
But the governor has not yet specified the source of the initial investment or what indebtedness might result. He has also switched from saying his plan might be a way to patch the budget gap of an estimated $500 million to saying the resulting money could pay for billions of dollars in infrastructure spending.
During a short interview this past Friday night, Justice said more will be revealed Wednesday when his administration presents its first budget and when he presents his first State of the State address.
“Give me Wednesday night. Give me Wednesday night and I’ll explain it so slowly that everyone can understand what we’re going to do,” he said. “There is a pathway to really aggressively getting after highway construction, creating lots of jobs, creating payroll taxes and a lot of things.”
Among those curious to hear what the governor presents is Senate Finance Chairman Mike Hall.
“I’ll just have to wait and see what he says,” Hall, R-Putnam, said in a telephone interview. “Being a businessman at his level, he certainly understands what the common man doesn’t.
“He’s looking at the state and saying, ‘You just have a cash flow problem. If we can deal until the cash flow gets stronger, rather than tax people, let’s solve the cash flow problem.'”
Hall suggested one possibility is, Justice could be embracing the bonding power of the state Parkways authority.
But, Hall said, another possibility is that Justice is considering taking another pool of money and working out a deal with Wall Street investors to provide a loan. One question is whether that approach would require a statewide vote.
“As I’m trying to decipher what he’s saying, it’s like a downpayment on a loan,” Hall said. “We give them X dollars, they take it and invest it and they give you back may be three or four times the money you give them. I’ve never seen this before. I’d be intrigued. I could see conceptually how somebody might do it.”
Hall continued, “It’s mind boggling to think you can bring that much cash in and sustain itself in time for the economy to catch up with the obligation of the deal. I think that’s what he’s going to propose of some sort.”
Although Hall would like to hear more, he said the public should be ready to scrutinize the details.
“If I’m the voting public out there, might be looking at that with a wary eye because if it doesn’t go well you have even more problem,” he said. “Any time you go borrow money, you could end up bankrupt. You could end up not being able to pay the loan. In that case you’d be a hard debt to somebody.”
In a long discussion with reporters at his office last week, House Speaker Tim Armstead expressed interest in the governor’s loan idea but said the public would need to weigh in on it.
“If you’re going to indebt the state, you’ve got to take that out to the voters and vote on it,” Armstead said.
Then again, Armstead also wasn’t sure exactly what the governor has been talking about.
“I assume that’s what he’s saying,” Armstead said. “I think that’s what he’s looking at, and that’s what’s been discussed for many years here. There’s been some reluctance to do it because of the bond indebtedness. You’re borrowing money. When you borrow money in the name of the state the voters have to approve that.”
Armstead was particularly intrigued by the possibility of increased spending on new roads and bridges. Aiming a new revenue source at new construction, he said, could help the state ramp up its maintenance with the money it normally spends from the Road Fund.
“If you put a billion dollars into new construction, that will free up so much money to fix the bridges and fix the potholes — do the new construction we need and free up resources. It gives us some breathing room to be able to do it from the long term.”
That sounds good to Mike Clowser, executive director of the state Contractors Association. But like everyone else, Clowser is waiting to hear more from the governor.
“I just know that he made infrastrure and highways a key part of his campaign. We obviously are looking forward to hearing the details,” Clowser said in a Monday telephone interview. “Obviously that’s something that he’s working on, and we’re not privy to what he’s looking at. But I’ll tell you what, it’s encouraging. Our guys haven’t head any encouraging news in about four or five years.
“It’s good news that we at least have a governor talking about investing in infrastructure in West Virginia. I’ll be tuning in very intently.”
Justice’s message about his borrowing idea has varied along the way.
During a general election debate, he described borrowing as a potential way to make up for a portion of a budget shortfall.
“If you have to have a bridge loan, some financial instrument of — not $500 trillion — but of $200 million or so to bridge you to the time that you need, I’d a whole lot rather do that than tax people,” Justice said in an Oct. 12 debate, moderated by Hoppy Kercheval of MetroNews.
HIs Republican opponent, then-Senate President Bill Cole, rebuffed the idea.
“I still didn’t hear a plan, other than to borrow $200 million or $300 million, which is not how you balance a budget,” Cole said then.
During Justice’s inauguration, he elaborated on the idea but made more emphasis of infrastructure spending. Settle in for this explanation:
“Some way, somehow I’ve got to come up with $225 million of monies that’s not anywhere today,” he said. “That doesn’t mean we have to tax you. We’ve just got to figure it out. Then, here’s what I’ll do. I told many people along the campaign trail, there’s a way to get things going with no money.
“The way is this, and whether it be the tolls or whatever it may be, I’ve got to come up with a bucket that is equivalent to $125 per living human in West Virginia. It doesn’t mean I’m going to tax you in any way, shape, form or fashion, but I’ve got to come up with $225 million. And here’s what I’m going to do with it.
“I’m going to turn and take it and use the multiplier of 15 years or 20 years or 25 years of the low, low interest rates we have today, turn it into $4.5 billion, put it into a financial instrument and sell it to Goldman Sachs or J.P. Morgan or whoever it may be. You see, I know this stuff. We’ll let them present-value it and give it back to us.
“It may only come back at $1.4 billion. That’s a lot of money. And then what I’m going to do is I’m going to turn right around, and I’m going to take that $1.4 billion, and I’m going to put it with as many highway matching dollars as I can. You can absolutely begin highway construction in this state tomorrow. Tomorrow. Like you can’t imagine. And for every billion dollars of work that we do, it creates 25,000 new jobs.”
House Finance Chairman Eric Nelson, R-Kanawha, is among those waiting to hear more.
The devil is in the details, Nelson said.
“I think that, in general, that’s a favorable way of looking at new construction or one-time maintenance,” Nelson said. “However, you have to have a repayment source.
“You get a mortgage, you have a house, but you have to have a dedicated repayment source to pay back your loan or else you won’t get that loan.”
Like others, Nelson is reading the tea leaves about Justice’s idea.
“If I had to speculate, he could issue a billion-dollar bond and potentially increase taxes on a certain base of constituents that would be dedicated to repaying that. I’m not going to sign on to anything until I see it and am able to fully vet it.”
One of Nelson’s worries is that West Virginia’s credit rating has been downgraded already in the past year by bond rating agencies like Moody’s and Fitch. Downgraded credit ratings mean West Virginia will have to pay greater interest rates when it borrows to pay for infrastructure projects such as water lines or school construction.
Nelson’s concern is that adding to the state’s risk could negatively affect its bond ratings again.
“That would be a big concern for us,” he said. “We issue a lot of debt.”
Hall, his counterpart in the Senate, says he’ll know better how to react to Justice’s plans once he hears them Wednesday.
“He’s been vague enough to where I’m at the point of guessing. I think it’s an educated guess,” Hall said. “Whatever he says and explains, I’ll understand it. When he does, I can talk about it then.”