DALLAS — The Louisiana State Bond Commission on Thursday amended its allocation policy for Gulf Opportunity Zone bonds to provide up to $500 million of the debt for a major industrial project.
The policy shift was requested by Stephen Moret, secretary of the Department of Economic Development. The policy became effective today.
The commission will continue to accept applications for GO Zone bonds, but applicants will be advised that top priority for the bonds will go to major projects endorsed by the development department.
Moret said the state was working with a major industrial company, which he declined to identify, that is considering a large manufacturing facility in southern Louisiana. The ability to issue up to $500 million of the tax-exempt private-activity bonds is essential to obtaining the facility, Moret said.
“We are 75% sure that we will be successful in this effort,” he said. “If something happens and we do not, we have two other entities that are also interested in using the allocation.”
However, the commission will not have the capacity to earmark bonds to the proposed project unless bond allocations that have been approved but not sold are returned to the state by the sponsors.
Director Whit Kling said the Bond Commission has allocated $7.4 billion of the $8.8 billion of GO Zone bond capacity received by Louisiana following the hurricanes of 2005. Of the total allocation, he said, $1.6 billion has not yet been issued.
Of the remaining capacity of $324 million, Kling said, only $216 million will be available following approval of several applications at the meeting. Another two applications, which are to be considered at the commission’s August session, are seeking a total of $115 million of GO Zone bond allocations.
Kling said he has strong indications that $275 million of bonds for three approved projects, totaling $275 million, will not be issued before the GO Zone bond program expires at the end of 2010. He said $175 million of those allocations will not expire until December.
The commission asked all applicants with unissued GO Zone bond capacity to the meeting on Aug. 19 with an estimate of the amount that could be returned to the state for re-allocation.
“We need to find out which ones are likely to close and which are not,” said state Treasurer John N. Kennedy, who chairs the bond commission. “That will give us four months to provide that capacity to someone else.”
Moret assured the commissioners that the state can use whatever capacity is remaining in its efforts to bring new business to the state and expand existing facilities.
“We would have no problem in issuing $490 million of GO Zone bonds by the end of the year if we had the capacity,” he said.