Louisiana House Sends Senate $500 Million State GO Bond Bill

DALLAS - The Louisiana House on Monday unanimously sent to the Senate a bill authorizing the sale of $500 million of state general obligation bonds for capital outlay projects in fiscal 2010.

The 95-0 passage came three weeks after the House failed to approve HB 3 on May 15 by the required 70 votes. The initial vote in mid-May was 62 to 24 in the 105-member body, with 19 lawmakers not present.

Members of the Black Caucus and representatives from the Baton Rouge area joined to delay the bond measure in an effort to obtain additional money for highway projects and other budgetary concessions. No formal agreements were announced, but lawmakers said they expect consideration of the projects in the fiscal 2011 budget.

The HB 3 bond bill authorizes the state to issue debt to reimburse the lines of credit used to finance capital outlay projects contained in HB 2.

HB 2 was sent to the Senate Committee on Revenue and Fiscal Affairs by the House in mid-May on a vote of 90 to 3.

The high-priority projects in HB 2's five-year capital program total $1.2 billion, but the total authorization will increase to $1.54 billion in fiscal 2010.

The authorized limit for capital outlay lines of credit grows each fiscal year, said Whit Kling Jr., director of the State Bond Commission.

"Each year the state is allowed to issue additional lines of credit of $200 million, adjusted for inflation since 1992," he said. "That will be $335 million this year."

The outstanding lines of credit will be reduced to approximately $1 billion with the proceeds from $500 million of GO bonds that the state expects to sell late this year, according to Kling.

"When the state approves a line of credit for a project, that is money we have authorized to be spent," he said. "The state will have to sell bonds in the future for the $1 billion in lines of credit."

The $500 million of GO bonds would be part of the state net tax-supported debt. The Louisiana constitution limits annual debt service on tax-supported debt to 6% of general fund revenues, which could pose a problem for a planned sale of $500 million of fuel tax bonds in fiscal 2010 for the on-going TIMED highway improvement program.

Kling said a report on the available capacity for state net tax-supported debt will be presented to the bond commission at its regular meeting on June 18.

"There will be an issue that needs to be resolved in regards to the TIMED bonds," Kling said.

The bond commission was scheduled to get the report on state debt at its May 21 meeting, but Commissioner of Administration Angèle Davis asked for a delay because the planned schedule for capital outlay debt sales had changed.

In addition to the $500 million sale planned for later this year, Davis said the state expects to issue $400 million in fiscal 2011 for capital projects, and then approximately $300 million every other fiscal year beginning in 2013.

Louisiana's GO debt is rated A-plus by Fitch Ratings and Standard & Poor's, and A1 by Moody's Investors Service.

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