In the past 13 years, Maine voters have approved 38 of 39 bond issues on the ballot, totaling $1.43 billion in value, according to data from Ballotpedia. On July 14, Maine voters will be asked to decide on two more bond issues related to Maine’s broadband connectivity and transportation infrastructure.
If history tells us anything, Mainers are likely to approve Questions 1 and 2 on the ballot this year. But voters should think twice before throwing money at these issues, as they can be solved without borrowing.
Question 1 concerns a $15 million general obligation bond to invest in high-speed internet infrastructure for unserved and underserved areas, used to match an estimated $30 million in other funds.
The bonds would be given to the ConnectME Authority, an instrumentality of the state responsible for distributing broadband grants to municipalities across Maine. The Authority defines unserved areas as places where broadband service is not offered, and underserved areas as places where less than 20 percent of households have access to broadband service.
COVID-19 has emphasized the value of broadband internet access, and there is no question that it is necessary for Mainers to compete in the 21st century. Expanding broadband services through ConnectME Authority, however, allows the government to overstep in an area that ought to be controlled by the private sector.
Among other projects, the Authority has the ability to give money to towns to establish Government Owned Networks (GONs). When towns enter into long-term contracts with internet service providers (ISPs) to establish these networks, they drive out competition from the private sector. With no competition, GONs may lack incentive to improve the quality of their technology or lower costs for customers.
Moreover, because GONs are subsidized by taxpayer dollars, Mainers are forced to cover the costs of losses or failures. If a wind or ice storm knocks down a utility pole, for example, local residents pay for the repairs. Private-owned networks, on the other hand, will restore connectivity without necessarily raising costs on individual consumers.
Taxpayers will also have to cover the difference if an ISP’s cost of establishing and maintaining broadband service exceeds the revenue generated from customers. A study from the University of Pennsylvania Law School shows that this is often the case. Of 20 GON projects examined in the study, 11 had a negative cash flow.
Question 2 concerns a $105 million transportation bond, with $90 million allocated to improve highways and bridges statewide and $15 million allocated to improve facilities, equipment, and other modes of transportation. Bond revenue for this question is estimated to draw $275 million in matching federal funds.
As with Question 1, there is no doubt that the bond brings to the table legitimate issues in Maine that need to be addressed. But borrowing money is no way to solve our transportation problem; in fact, it will only do more damage to Maine in the long-run.
Maine’s annual transportation funding shortfall––the difference between what the state can spend and what it needs to maintain the transportation system–– is $232 million dollars. Continuing to fund roads and bridges through bonds will keep the shortfall intact; however, reallocating sources of revenue can help close the gap.
Maine’s Highway Fund is the primary means through which the construction and maintenance of roads and bridges are subsidized. While the Fund collects revenue from gas taxes and motor vehicle registration and fees, motor vehicle related sales taxes go toward the General Fund.
If motor vehicle sales tax revenue was reallocated to the Highway Fund, approximately $160 million could be used to plug the gap. Repairs would thus still be made to Maine’s transportation system without the economic burden of borrowing money. Moreover, the reallocation solution prevents an increase in gas taxes, another idea which has been tossed around to account for the shortfall that is both incredibly regressive and extremely unpopular among voters.
If passed, the bonds will generate new debt to be added to the $543 million outstanding debt service in Maine. In addition to the principal amount borrowed, the two bonds are expected to accrue $33 million in interest over their lifespan, for which taxpayers will also foot the bill.
Voters are often less aware of the interest accrued on bonds. If Mainers knew they have paid roughly $810 million in interest accrued on bonds over the past 30 years, perhaps they would rethink their decisions on bonding.
With the economic consequences of the pandemic, we can ill afford to carelessly borrow money. Rather, we ought to address the issues on the ballot through alternative, more cost effective means –– i.e. leaving broadband service to the private sector and reallocating revenue from the General Fund to secure the funding necessary to maintain Maine’s transportation infrastructure.
