MONTPELIER — The Senate Finance Committee began reviewing a proposal Tuesday to direct 10 percent of the state’s cash on hand to local investments.
The “10 Percent for Vermont” plan sponsored by Washington County Sen. Anthony Pollina, an alternative to a politically unpopular state-owned bank, emerged from the Senate Government Operations Committee in a pared-down form. That committee calls for:
n Moving 10 percent of the state’s daily cash balance, about $35 million, to the Vermont Economic Development Authority for investment.
n Directing VEDA to use the money to support local investment.
n Continuing VEDA’s policy of primarily lending through partnership with local banks and existing institutions.
n Appointing an advisory group to help set initial funding-related priorities and address questions regarding increased local investment to meet capital needs and the possibility of VEDA being granted a banking license.
Under Pollina’s original bill, S.204, VEDA would have been granted authority to accept deposits from the state and lend money like commercial banks. The lending would still flow largely through local banks, but the state would have more control over how the money was used.
Currently, the state deposits its cash in two large commercial banks — TD Bank and People’s United. The banks lend money wherever it creates the most profit, according to Pollina. He said the 10 percent plan would have tax dollars invested where they benefit the state most, like renewable energy projects, affordable housing and agriculture.
“It’s not that the banks are evil. They just have other priorities than investing in Vermont,” he said.
VEDA, created by the Legislature in 1974, is a state-sponsored lender that has provided about $1.9 billion in financing to entrepreneurs and businesses that create jobs in the state. It works with banks to provide low-interest lending in exchange for promises of job creation.
Although the Government Operations Committee stopped short of granting VEDA banking authority, the Finance Committee could decide to return to that route.
But that idea faces opposition from the state treasurer’s office and the Vermont Bankers Association.
Pollina told the Finance Committee on Tuesday that his plan would provide the state with “a very significant economic development opportunity” and is the “ultimate ‘buy local’ theory.”
“I’m told to shop locally during the holidays, but yet our tax dollars are sent out of state,” he said.
Granting VEDA banking authority would allow it to borrow from within the banking system and maintain liquidity, Pollina said.
Deputy Treasurer Stephen Wisloski said the treasurer’s office is not against using up to $35 million of the state’s cash for local investments. However, he said about $17 million is already being used under various statutes.
“In one regard you could say we’re already halfway,” he said.
Boosting that amount to $35 million would not harm the state, Wisloski said. However, the treasurer’s office is not supportive of granting VEDA banking authority, he said.
Similarly, Chris D’Elia of the Vermont Bankers Association said the concept of taking 10 percent of its cash to invest locally “is one that we have no problem with.” But Pollina’s original plan “is a bill that we do not support because there are many concepts in there that we cannot support.”
Expanding VEDA’s authority could put the state’s bond rating at risk, which would have a cascading impact around the state, D’Elia said.
“We would not want to see anything that would have a negative impact on the bond rating of the state of Vermont because that would impact the school districts and municipalities that we work with,” he said.
Banks in Vermont and elsewhere are looking for projects to fund, according to D’Elia, but many have not met the banks’ standards.
“Are there projects that aren’t getting funded? Absolutely, for very, very good credit risk factors,” he said.
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