BRADENTON, Fla. — A one-year extension to sell Gulf Opportunity Zone bonds by Congress will allow Louisiana to review applications for its $300.83 million of remaining capacity, the State Bond Commission learned Thursday.
The authorization to sell GO Zone bonds was extended in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act approved in December.
Qualified tax-exempt, private-activity GO Zone bonds were authorized by Congress in 2005 to stimulate economic recovery in Louisiana, Mississippi, and Alabama following hurricanes Katrina and Rita.
Louisiana received an allocation of $7.84 billion.
“We thought GO Zone bonds died, but they didn’t,” said Whit Kling, executive director of the bond commission.
Most GO Zone bonds approved by the state were issued or encumbered by last December’s original cutoff date except a $300 million allocation to Georgia-Pacific. The authorization to sell the bonds has since lapsed, he told commission members.
Georgia-Pacific planned to use the bonds to upgrade a toilet paper mill in East Baton Rouge Parish, a project expected to retain jobs and create others during construction. The company has since reapplied to use the $300 million allocation that lapsed, Kling said.
In addition, he said a new, completed application for $16 million in GO Zone bond capacity had been received and two new applications for “very substantial projects” are expected to be filed. The Georgia-Pacific project is still considered a top priority.
All applications competing for the remaining capacity will be presented in a future meeting, said Louisiana Treasurer John Kennedy, chairman of the Bond Commission.
The state Department of Economic Development will be consulted about the length of time applicants will be given to sell remaining bond allocations this year.
In other action at Thursday’s meeting, the commission approved the issuance of $300 million of state general obligation bonds. The planned issuance will take out approximately $300 million of $1.7 billion in lines of credit held by the state, Kling said. No other details about the offering were released.
The commission also approved soliciting for bond counsel to provide legal advice as the state determines how to deal with $200 million of variable-rate demand GO bonds issued in 2008 because a letter of credit from BNP Paribas expires July 17.
Kling said one option under consideration is renewing or extending BNP’s letter of credit. However, the firm has not indicated it is willing or interested in those options.
“It’s highly likely that the cost [for another LOC] will be substantially higher,” he said.
Two other options include restructuring the VRDBs in a different index mode or refinancing them into long-term debt and terminating an associated swap. A recommendation for dealing with the VRDBs will be brought back to the bond commission in February or March.