DALLAS — The Louisiana Bond Commission yesterday accepted a report on the state’s net tax-supported debt that includes different versions of whether annual debt service would exceed the constitutional limit.
The Bond Commission is prohibited from authorizing bonds if the state’s total annual debt service would exceed 6% of estimated general fund revenues.
The constitutional limit would be exceeded in fiscal year 2011, with annual debt service remaining at or close to the limit through fiscal 2026 in the projection developed by director Whit Kling Jr.
However, the projection developed by the Department of Administration showed a lower level of general obligation debt sales than the staff report. Commissioner of Administration Angèle Davis said debt service should be below the constitutional limit until it peaks at 6.08% in fiscal 2016 and then falls.
The state usually sells GO bonds every year, with the proceeds dedicated to capital outlay projects that had relied on state lines of credit for construction financing. Louisiana’s GO debt is rated A1 by Moody’s Investors Service and A-plus by Fitch Ratings and Standard & Poor’s.
The staff estimate is based on GO debt sales of $500 million in fiscal 2010, $400 million in fiscal 2011, $351 million in fiscal 2012, and $335 million in fiscal 2013, with debt sales thereafter increasing by 2% a year.
The administration’s debt schedule agrees with the projections for GO debt sales in fiscal years 2010 and 2011, but then limits GO debt issues to $300,000 every other year beginning in fiscal 2013.
Kling said the administration’s version predicts that state revenues will be sufficient to fund some capital outlay projects without the need for bond proceeds. The staff version does not, he said.
It is reasonable to assume that not all the projects would require bond proceeds, according to Kling. That was the case this year, he said, and the state did not issue GO bonds in 2007 or 2008 due to healthy revenues sparked by hurricane reconstruction.
Both projections in the report contain estimates of spending and revenues over many years that are hard to predict, he said.
“You can accept the report with both versions,” Kling said. “Neither one of them will be what we actually do.”
In addition to agreeing on GO bond issues through fiscal 2011, both projections include the $485 million of gasoline and fuels tax bonds sold in fiscal 2009 and a projected sale of $500 million of the bonds in fiscal 2010.
Kling said the 2010 sale would complete the authorization for bonds to finance the state’s Transportation Infrastructure Model for Economic Development capital improvement program. However, proceeds will not be sufficient to complete the final two projects on the constitutionally mandated road and bridge program.
The commission also approved the fourth and final tranche of the $485 million of bonds to be issued for the TIMED program in fiscal 2009.
The $60.6 million of gasoline and fuel tax bonds will be issued as taxable Build America Bonds by the end of June, Kling said. Citi will be the underwriter for the negotiated sale.
The state’s gasoline tax bonds are rated Aa3 by Moody’s and AA by Standard & Poor’s.
Each of the four TIMED bond issues completed since early May involve two swap agreements that must be monitored closely, Kling said.
“I will spend 75% of my day taking care of it,” he said.
Louisiana’s net state tax-supported debt totaled $5.23 billion on Dec. 31. Service on the debt in fiscal 2009 is $214.7 million, or 2.17% of the projected $11.38 billion in general fund revenues.
The year-end total included $2.54 billion of outstanding GO debt. Authorized but unissued GO debt totaled $1.25 billion.