DALLAS — Sponsors of $4.3 billion of approved but pending Gulf Opportunity Zone Bond projects in Louisiana will have another 60 days to complete the sale of the bonds under a blanket extension approved Tuesday by the Louisiana State Bond Commission.
The existing policy gives sponsors 120 days to sell the bonds after they received an allocation approval letter from the governor’s office. However, several projects approved by the commission in the latter part of 2007 asked for an extension because market conditions are hindering the sales process.
“To say the credit market is in turmoil is an understatement,” said state Treasurer John Kennedy, chairman of the commission. “Frankly, it is just a mess, the worst one I’ve ever seen. It is impossible to close on even good deals, backed by good letters of credit.”
If the bonds allocated to a project are not sold within the 120-day time frame, the application must be withdrawn and the allocation is returned to the pool of available GO Zone bond capacity.
Bond commissioners accepted the proposal by executive director Whit Kling Jr. to give all pending projects an extension. However, Kling also noted that sponsors of projects that did not receive preliminary approval in the first round of allocations are waiting for an opportunity to submit applications for the allocations that are turned back.
Kling said the current procedure was developed by the administration of Gov. Kathleen Blanco, who was succeeded this month by newly elected Gov. Bobby Jindal.
“A delay is the easiest answer, even if it is not the most equitable,” he said. “It will provide an opportunity for this office to meet with the new administration and really look at this problem. The current system does not work.”
The state was allocated $7.8 billion of federal GO Zone bond capacity by Congress, according to Kling, but received 144 applications totaling $12.4 billion.
He said almost $6.6 billion of projects have received allocation letters from the governor, and $2.3 billion of GO Zone bonds have been issued. The $4.3 billion of allocations that are pending is affected by the 60-day extension.
The remaining unused capacity is reserved for projects in the hurricane-affected areas of Orleans, St. Bernard, Cameron, and Washington parishes.
All GO Zone bonds must be issued by July 2010.
Delta Community College will be able to build a campus in the northeast Louisiana city of Monroe with the proceeds of $45 million in revenue bonds under a plan approved by the commission.
The Monroe campus was not included in the $200 million revenue bond issue approved by the commission last month for the Louisiana Community and Technical College System because a dispute over land for the campus delayed the application.
“This project predates those funded in December, but this land situation dates back to the Louisiana Purchase in 1803,” said system president Joe May.
May said a plot map made in 1838 of the 70 acres the school sought for the new campus was not clear about who or what owned 22 of the acres. The 2006 Legislature approved an appropriation of $5.7 million for the property, which is now in the process of being purchased, he said.
“We need these facilities,” May said. “We’ve been operating in leased space since we began offering classes in 2001. We have no more space for any more students.”