BRADENTON, Fla. — The Louisiana State Bond Commission plans to move forward with a $335 million general obligation bond deal as the state grapples with debt capacity issues.
The commission decided to move ahead with the bond issue at a special meeting on April 2, where cash flow and debt capacity issues were discussed.
The GO bonds will sell competitively around May 6 or 7. Proceeds will reimburse lines of credit extended to state and local agencies for capital outlay projects, and advance refund $51 million in bonds for the University Medical Center New Orleans project.
After the offering in May, the state projects that it will have $265 million in GO capacity in fiscal 2017.
That means the state will have about $800 million more in promised capital commitments over the next 12 to 18 months than it will have the ability to finance, due to debt capacity restraints partly because state revenues have been lower than projected.
"Fundamentally, I think what this tells us is that the rate at which we are spending is burning through cash faster than we have capacity to replenish," said Renee Boicourt of Lamont Financial Services, the SBC's financial advisor. "We will confront a decision early next spring or late winter in terms debt capacity and our demand for cash."
Those problems will face Gov. Bobby Jindal's successor and 144 lawmakers who will be elected later this year. Jindal will be term limited out of office.
"We've got a problem on the building side, and the new governor and the new Legislature and the new bond commission will be walking in here with a shortage of $800 million," said State Treasurer and SBC Chairman John Kennedy. "I don't want to sugar coat this. It means some projects aren't going to get done."
Kennedy also said there's a potential for new projects to be added to the capital financing list by the Legislature.
"You can talk about managing this all you want to but we've got a problem here," he said. "We need to prepare for it now."
The commission has been reviewing avenues to monitor cash flow and financing needs. However, it took no action at the April 2 meeting other than approving the upcoming GO bond deal.
Adams and Reese LLP and Auzenne & Associates LLC are co-bond counsel.
