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Douglas: Citizen Bonds Revisited

11/08/11 7:55AM By Jim Douglas
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(Host) Former Vermont Governor and commentator Jim Douglas has been thinking about Vermont's response to Tropical Storm Irene. And he has a suggestion for one more possible way to help the recovery.

(Douglas) I was chatting recently with my friend, Cindy Hill, a local attorney, professor and accomplished musician, who had a great idea. We were discussing the tremendous response by Vermonters to the damaging storm this year that destroyed homes, roads and bridges, disrupting so many businesses and lives. Many of us have written checks, delivered unneeded clothes and other items to charities and gotten our hands dirty helping friends and neighbors clean up.

Still there remains a yearning to do more. I vividly recall Vermont's response to Hurricane Katrina that devastated the Gulf Coast 6 years ago. In just days we collected 4 million pounds of donated goods and shipped them by truck convoy to Mississippi. That state's governor singled out Vermont's generosity in his speech to the legislature a short time later. If Vermonters cared so much about folks whom they didn't even know and who lived so far away, it shouldn't be a surprise that we would want to do more when a tropical storm hit here.

Even in normal times, it's nice to be able to do something to help our state. When I began my duties as state treasurer in the mid-90s, I launched a program called ‘Citizen Bonds' through which Vermont residents could invest in infrastructure projects around the state: schools, water and sewer systems, roads and bridges. Almost every year the state borrows tens of millions of dollars to improve our physical structures as authorized by the legislature to fund the capital budget. Usually state bonds are bought by large institutions and mutual funds, but Citizen Bonds are sold in smaller denominations so average investors can afford them. I used to tout them as great stocking stuffers!

The recent storm caused damage that will stretch our financial resources. It's encouraging that earlier cost estimates were inflated, but it'll still be expensive. Why not issue small denomination ‘Storm Bonds?' It would give Vermonters a way to be involved in repairing vital infrastructure and acquire a safe investment at the same time. I know that the cost of issuing bonds can be high when the face value is small, but I'll bet some underwriters would be willing to offer a little flexibility under the circumstances. It would be important to have them available at, say $100, instead of at the usual minimum of $5000.

We've been successful in recent years in ratcheting down our long-term debt and enhancing the state's credit ratings. I'm not suggesting that we borrow beyond a reasonable level, but it would be good to give Vermonters a chance at a competitive investment and to use our resources in yet another way to help rebuild our state. It's been a tough year, but our resiliency is impressive. I hope Vermonters will continue to remember those who have suffered from the storm and are still struggling to rebuild their lives long after the wave of publicity has subsided. A small denomination bond program is one way to keep that connection alive.
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