Critics warn that the sale of part of the portfolio of loans to cities and counties will have major long-term consequences for local government. Supporters of the idea say it's overdue.
The Georgia Environmental Facilities Authority makes low-interest loans to local governments for the construction of water and sewer systems, which creates jobs.
"It has been one of our major tools for economic development," Rep. DuBose Porter, D-Dublin, said as he argued against the sale on the House floor.
The vote for the sale was one of the closest votes in the House this session, 94-60.
Porter, a Democratic candidate for governor, warned that reducing the portfolio would leave too little for all the communities that need to expand their systems. As a result, they will have to borrow money commercially at higher rates or forgo the jobs, he said.
Often, expansion is to extend utilities to a new factory bringing jobs to an area.
Environmentalists oppose the sell-off because another use of the loans is to upgrade sewage-treatment plants to meet improved federal standards.
"It's going to raise the rural water rates," predicted Neill Herring, a lobbyist for the Sierra Club and other environmental organizations.
Herring, who is also an attorney, identified several legal hurdles to the sell-off. One stems from the constitutional amendment that created the Environmental Facilities Authority in 1986, which requires any money generated to be reinvested into a revolving-loan fund that municipal governments can borrow from again and again.
Gov. Sonny Perdue's spokesman, Bert Brantley, said state lawyers have reviewed the proposed sale since 2003, when it was first considered.
"There were definitely questions in '03 and questions today. But we have looked at this very closely and feel very comfortable about where we are," Brantley said.
THE PLAN IS TO bundle the loans and sell enough to investors to pocket $288 million. There's $593 million in the fund now.
That sale sometime this summer is also supposed to generate enough to pay Environmental Facilities Authority staff for the year, cover the cost of researching and drafting a statewide water plan, and leave $20 million for the authority to continue making loans. Also, Perdue's budget calls for separately issuing $19 million in bonds to go into the authority.
Borrowing money through new bonds to replace some of the loans being sold off is a roundabout way to borrow money for operation of the state. Herring said the state could simply take out its own loan for as much as $850 million, according to his reading of the constitution.
Brantley said that would violate past practices and risk the state's AAA rating with the investment agencies.
A STRONG ADVOCATE for the selloff is Kelly McCutcheon, the president of the Atlanta-based Georgia Public Policy Foundation, a market-oriented think tank.
He says that as the Environmental Facilities Authority grew in recent years and began offering loans to large governments such as Atlanta and Cobb County, it not only strayed from its original purpose as the lender of last resort, but it also began to compete with banks.
"Building and maintaining water and sewer infrastructure is critical to Georgia's future, especially with growth and the droughts experienced in recent years," McCutcheon wrote in August. "However, it is not a good use of taxpayer funds to offer subsidized loans in competition with private Georgia lenders."
Richmond County borrowed $12 million from the fund as far back as 1994, and Savannah borrowed $10 million in 1992. More recently, Thomson and McDuffie County jointly got $3.2 million in 2008 for a sewer line extension.
Brantley says the program isn't disappearing, only helping the state through a difficult budget crisis.
It's not hard to imagine the outcry of trying to balance the budget with $288 million more in budget cuts. That's roughly the amount briefly considered for higher education.