The Sunshine Economy: Public Debt
The picture above shows the beginning of a second runway at Ft. Lauderdale-Hollywood International Airport that, once completed, is expected to cost $2.3 billion. The runway is just part of a multi-billion dollar expansion project already underway.
More than half of the project is being paid for with borrowed money. The Broward County Aviation Department will eventually assume $1.5 billion in public debt. Last week, it successfully sold $450 million worth of public bonds to continue the construction project.
This is just one instance of using borrowed money to fund a project in the public's name. On Monday, The Sunshine Economy looks at "We Owe You: Public Debt in South Florida.”
In the case of the new runway, the money will be paid back using fees charged to airline operators, which eventually pass those charges on to passengers through higher airfares. The Broward County Aviation Department Chief Financial Officer Doug Wolfe shepherded the bonds to market. The Sunshine Economy talks with Wolfe about the borrowed money and what the public gets in return.
In November, Miami-Dade voters will be asked to increase property taxes to pay for what would eventually total $830 million in bonds to upgrade and build new facilities at Jackson Health Systems, the public hospital system in Miami-Dade County. Carlos Migoya is the CEO who has led JHS out of the near-financial collapse of three years ago. He says without the public debt to pay for the new facilities, JHS would become less competitive and won't be able to attract patients with health insurance. Those patients are becoming more and more important with Medicaid funding under pressure.
Migoya's tenure as the head of JHS comes after the hospital's financing arm was the subject of an investigation after a public debt sale in 2009. This fall, the hospital settled with the U.S. Securities and Exchange Commission, instituting new financial controls and transparency to answer problems uncovered with the 2009 offering.
Eric Bustillo is the head of the Miami Regional Office of the SEC. He notes the agency has stepped up its examination of public debt, both as the overall market of these IOU's has grown to almost $4 trillion nationally, but also as public employee pensions weigh on state and municipal finances.
Sheila Weinberg of TruthinAccounting.org is one of those who has long protested how governments account for their pension promises. She contends the federal government’s debt is over $70 trillion, not the almost $17 trillion acknowledged by the Treasury Department. And that's just the federal government. State and local governments have also made promises to their workers about retirement and health care. Weinberg is worried about the long-term effect such promises have on government budgets and the need they may have to issue even more IOUs in the public's name to pay for them.
The Sunshine Economy series is sponsored by Kaufman Rossin and Company, one of Florida's largest independent accounting firms.