DALLAS - The Louisiana State Bond Commission gave its approval Friday to more than $1 billion in state general obligation bonds to finance high-priority projects contained in the capital outlay bill passed by the Legislature in June.
Although the authorization is for $1.2 billion of GO bonds, the state intends to issue only about $500 million of the debt in a sale tentatively set for late 2008.
Jerry Jones, director of the Office of Facility Planning and Control, said the bond proceeds would reimburse the state for expenditures from the project's cash lines of credit.
"There are no new projects being funded," he said. "We pay the expenses from the capital outlay escrow account, and sell bonds when the escrow account gets low."
Jones said the capital outlay escrow account currently contains about $200 million in bond proceeds and $500 million from other funding sources.
Whitman Kling Jr., director of the Bond Commission, said the last time the state issued GO debt for capital outlay purposes was in September 2006. Louisiana has not needed the bond proceeds due to the inflow of federal disaster funds and insurance claims payments following the hurricanes of 2005, he said.
All three rating agencies have upgraded Louisiana's GO debt in the last month, Kling said. The GO bonds are rated A1 by Moody's Investors Service and A-plus by Standard & Poor's and Fitch Ratings.
"We're still in the lowest-rated category, but at least we're not by ourselves anymore," Kling said. "We're now in the same category as California."
A report on Louisiana's net state tax-supported debt presented to the commission said the state will have the capacity to issue only a total of $200 million in additional tax-supported debt through 2028 if issues that are currently authorized or planned go to market as scheduled.
"That is based on a lot of assumptions," Kling said.
The assumptions used in the projections include an average interest rate of 5%, tax revenues in accordance with predictions by the Revenue Estimating Conference, and annual sales of GO bonds for capital outlay projects of $351 million beginning in fiscal 2012 and increasing by 2% a year over the next 20 years.
The estimate also includes the planned $500 million capital outlay GO bond sale in fiscal 2009, and $400 million of capital outlay bonds in fiscals 2010 and 2011.
Louisiana's constitution prohibits the state from issuing additional tax-supported debt if total annual debt service would exceed 6% of state revenues.
As of Dec. 31, 2007, Louisiana had $5.88 billion of net state-tax supported debt. That's $1,369 per person, up $96 from 2006's per capita debt of $1,273. The state's total debt service in fiscal 2008 was $246.7 million, or 2.2% of the $11.2 billion in revenue.
The state is also scheduled to issue $500 million in gasoline tax revenue bonds for its Transportation Infrastructure Model for Economic Development program in fiscal 2010, but Kling said current revenues from the 4 cents per gallon tax would not support the debt.
"We're working on a solution, but we don't have one yet," he said.
The commission gave its final approval to a proposal by the New Orleans Industrial Development Board to issue $150 million of revenue bonds for the first phase of a plan to build facilities at the naval support base in Algiers and lease them to the military and other organizations.
The base was set for closure, but it will be kept open under an agreement that calls for the city to provide rental space to the Department of Defense, defense contractors, and private firms. Work must begin on the project by the end of September and be completed by 2010.
Kling said he could not make a recommendation on the proposal because of a lack of information.
The commission also approved an Oct. 4 election for voters in East Baton Rouge Parish to decide on a proposal to increase taxes that would support a $989 million bond package. The action allows the election to take place if the parish council decides this week on a vote in October rather than at the general election in November.