DALLAS — The Louisiana State Bond Commission on Tuesday reserved $600 million of Gulf Opportunity Zone private-activity bonds for an unidentified manufacturing project in the southern part of the state.
Jason El Koubi, special assistant to Economic Development Secretary Stephen Moret, requested that at least $600 million of unissued GO Zone bond capacity be set aside "for a substantial job-creating project."
El Koubi declined to identify the potential project, but indicated a definitive decision should be reached before the commission's next monthly meeting on Sept. 16.
"We will know in advance of the September meeting if this project is going ahead or not," he said.
The commission agreed to reserve the $600 million of issuance capacity requested by the Department of Economic Development, but told director Whit Kling to keep accepting and reviewing new applications for additional bonds.
The potential project will virtually exhaust Louisiana's available GO Zone bonding capacity if the $600 million allocation is made. The state had more than $700 million available before Tuesday's meeting from $8.8 billion of the private-activity bonds Congress authorized after hurricanes Katrina and Rita devastated Louisiana in 2005.
The commission approved another $105 million of GO Zone bonds Thursday, leaving about $605 million of capacity.
Kling said applications for a total of more than $60 million of GO Zone bonds will be considered at the September meeting. He expressed doubt that applications considered by the commission in October or November would be able to obtain the required approvals before the program expired. GO Zone bonds approved by the commission must be sold by the end of 2010, when the program expires.
However, Treasurer John Kennedy said requests for new GO Zone bonds from the dwindling amount of remaining capacity should be encouraged. He said steps can be taken to ensure that new applications receive a timely hearing, including special meetings and being flexible with the rules.
"The objective is not to follow the rules just to follow the rules," Kennedy said. "Our intent is to use all of our allocation and not leave money on the table."
The sale earlier this week of fuel-tax bonds for the ongoing state highway program was well-received, according to Kling. Retail purchasers accounted for 15% of the issue, he said, with institutional investors snapping up the rest.
Freda Johnson, president of Government Finance Associates Inc., the commission's financial adviser, said institutional investors were hungry for traditional tax-exempt debt due to large offerings of taxable Build America Bonds.
"We had 34 institutional buyers submitting bids, and that is as big a number as I've seen in years," she said. "That's a strong endorsement by the investment community."
The intention was to sell $405 million of bonds for the Transportation Infrastructure Model for Economic Development program, but a $32 million premium reduced the actual par volume to $394 million and raised the amount going to the highway capital improvement program to more than $426 million.
Kling said the bonds are expected to be the last tranche for the TIMED projects.
