HARRISBURG -- The Rendell administration says the state could become a deadbeat, unable to make payments of millions of dollars owed for completed construction work, if the Legislature doesn't act quickly.

Budget Secretary Mary Soderberg said in a letter last week that reimbursements for work completed on hundreds of important capital projects around the state, including 22 in Allegheny County and eight in Beaver County, could grind to a halt unless the General Assembly approves $775 million in new borrowing by today.

But swift legislative action could be a problem, since the state Senate doesn't plan to return from its November break until Dec. 15. The House is due to return today, the deadline that Ms. Soderberg set for action on the Capital Debt Act for fiscal 2009-10.

"Well over 1,000 ongoing capital projects throughout every corner of the state" could be affected, she said. "Each of these capital programs is running out of [state bond funds] to provide payments to contractors and municipalities for ongoing capital projects. Failure to make timely payments to contractors will also result in penalty and interest charges to the commonwealth for certain projects."

A spot check of projects in the Pittsburgh area showed that in most cases the situation isn't as dire as the state suggests. Many projects have been completed and contractors have been paid, but organizations are waiting for reimbursement from the state, which could cause cash flow problems or delay other projects.

Senate Republican spokesman Erik Arneson said Senate leaders got the budget secretary's letter and "will review it to decide whether any changes to the Senate schedule are necessary."

Selling bonds is a common method the state uses to borrow money and incur debt. The state typically issues $500 million to $800 million in general obligation bonds every four to six months to provide continued capital money for projects.

A payment delay will affect construction projects in three areas. The Redevelopment Assistance Capital Program, run by the state Department of Community and Economic Development, reimburses local governments and contractors $15 million a month for work that's been completed. But the program has virtually run dry, with less than $200 on hand.

As a result, reimbursements for work completed on all Redevelopment Assistance Capital projects "have now been halted due to insufficient funds," Ms. Soderberg said.

Also affected are road and bridge projects funded by the Department of Transportation; the demand for repayments is $15 million per month but there is only $3.5 million left.

A third program covers public improvement projects funded by the Department of General Services; it spends $75 million a month on reimbursements but has only $15 million left.

Projects being affected include state prison renovation and expansion; rehab of defense installations and veterans homes; flood control projects; and renovation of universities.

With the state economy slowly starting to emerge from the recession, she added, "Now is not the time to slow down or suspend construction projects due to an inability to enact this [borrowing] legislation," Ms. Soderberg said.

Megan Stearman, public information officer for the Pittsburgh Urban Redevelopment Authority, said in most instances developers pay contractors with financing they arrange themselves, then receive reimbursement from the state. The URA serves as a pass-through for state money in many of those projects in the city.

"It's certainly not as time-sensitive as it might seem," said Ms. Stearman. "It probably wouldn't keep a development from happening."

At St. Clair Hospital in Mt. Lebanon, for example, officials are waiting for reimbursement of $3 million from the state as part of a $13.5 million project to refurbish the emergency room. The new facility opened nearly a year ago.

The situation is the same at the Carnegie Museum of Natural History and the August Wilson Center for African American Culture, where projects have been completed and officials are awaiting reimbursement.

"Our understanding is the money will be released about the middle of December and we're OK with that," said Richard Siever, director of public relations at St. Clair. "It hasn't delayed this project, but it could delay other projects if that money isn't approved soon."

First Published: December 7, 2009, 5:00 a.m.