Louisiana’s $7.9B Allotment of GO Zone Bonds Almost Tapped Out

ATLANTA — Louisiana was authorized to issue up to $7.9 billion of bonds under the Gulf Opportunity Zone Act of 2005 and officials report that most of that has been issued or is set to be sold. The funds have been earmarked to spur economic development in the areas affected by hurricanes Katrina and Rita. The federal legislation stipulated that the bonds be sold by 2011. After the hurricanes hit the state in 2005, Congress passed the Gulf Opportunity Zone Act, which provides for the bonds. In Louisiana, all debt requests must be approved by the State Bond Commission. The panel has used caution in how the bond proceeds from the GO Zone Act are doled out. They’ve also tried to make sure that the areas most affected by the hurricanes, including New Orleans, had time to sort out the magnitude of damages without having to worry about whether the funds would run out. In fact, the commission has a policy that calls for half of the GO Zone dollars to go to the most affected areas.A local banker noted that the policy has been effective, as governments and other issuers take advantage of the GO Zone act. The deals have also managed to get investment grade ratings as well as insurance, which he said is indicative of the market’s appetite for the state’s debt. Whit Kling, the director of the Bond Commission, said that about 59% of the bond authorization has received final approval for sale. “There is very little left,” Kling said. “The overwhelming majority of projects are not big. They have been in the $40 million to $60 million range. There have been only a couple of massive projects.”That includes a $1 billion deal from St. John the Baptist Parish that priced this week. Proceeds are being used to expand the refinery facilities for Marathon Oil Corp. The project being built by Marathon consists of a portion of an expansion to an existing oil refinery. A two-story facility that will be about 65,000 square feet will be built. There will also be a new warehouse and maintenance shops. The entire expansion is currently expected to cost about $3.2 billion.The bond commission will meet today and the agenda is heavy with GO Zone bond requests — to the tune of about $1.5 billion. One of the requests totals $1 billion by itself — for the Louisiana Public Facilities Authority to issue debt for the Faustina Hydrogen Products project. Proceeds will be used to construct a petroleum coke gasification facility to be located in St. James Parish. The facility will produce several chemicals, including ammonia, methanol, sulfur, and carbon dioxide to be sold to other industrial installations that will be used as feedstock in the production of other commercial products.The St. James Parish and St. John the Baptist are among the largest GO Zone requests that have been presented to the bond commission for approval.At last month’s commission meeting, it was clear that those wishing to reap the proceeds from the GO Zone Act understood that the funds were diminishing. A dairy farmer who owns a company called Louisiana Family Farms reached out to state Sen. Ben Nevers about receiving some of the GO Zone bond proceeds. The $25 million revenue bond request was approved and the bonds will be issued by the Louisiana Agricultural Finance Authority. The St. Tammany Parish Development District is on the agenda to request up to $250 million of GO Zone revenue bonds for the Slidell Development project. The project, which is up for preliminary approval, would allow for the company to build a multipurpose real estate development consisting of retail, residential, office, education, and medical facilities in the city.Another GO Zone request on the agenda comes from the St. Charles Parish Council, which wants to issue about $2.7 million of revenue bonds to build a food distribution facility for a construction supply wholesale distribution business called Ram Tool. The St. Tammany Parish Development District wants to receive $25 million of bonds to build a medical office building, outpatient diagnostic center and lab for Cypress Medical. The parish also wants final approval to sell up to $24 million of debt to build a shopping center.At today’s meeting, the commission also will consider a $200 million GO Zone issue for Air Products & Chemicals. A facility that would be used to supply ExxonMobil Corp. with the ability to produce hydrogen and steam would be built in Baton Rouge.Also, Air Products could receive a $100 million GO Zone bond issue to build hydrogen pipelines from Norco to New Orleans and from Plaquemine to Baton Rouge. The bonds for both Air Products ventures would be sold by the Louisiana Public Facilities Authority. One state official said these projects will only serve to enhance the state’s position in the oil and gas industry, pointing out that the industry is the state’s “bread and butter.”