DALLAS — Louisiana can issue up to $800 million of new general obligation debt over the next two years without exceeding a constitutional limit on debt service — more than previously assumed.
The capacity had been estimated at less than $150 million after Louisiana sold $300 million of state GO bonds in March, State Bond Commission Director Whit Kling told the commission Thursday.
Annual debt service on state tax-supported debt is limited to 6% of general fund revenues in any year that the debt is outstanding. Louisiana had $6.15 billion of outstanding state tax-supported debt at the end of 2012.
The unexpected room is a result of increased tax collection expectations by the Revenue Estimating Conference and refundings that have reduced debt service requirements, Kling said.
The additional room will allow for a $500 million competitive GO bond issue in late November or early December and a $300 million issue in fiscal 2015.
The projection outlined to the bond commission calls for annual GO bond sales thereafter of $350 million.
Proceeds from the GO bonds sales reimburse the state for lines of credit extended to projects in the Legislature's capital outlay program.
"The bond sales will meet the need for projects in the pipeline," Kling said. "We're not catching up but we're getting close."
The $800 million of GO bonds will push debt service requirements to the constitutional limit, said financial advisor Renee Boicourt of Lamont Financial Services Corp.
"We're still going to have to sculpt the deal to fit in under the debt limit," Boicourt said.
But Louisiana will save money over the long term by issuing up to the debt service limit now, she said, because interest rates will go up.
"This will use up all the available capacity," she said. "We're projecting new capacity will be available for the $350 million a year indefinitely."
A report on state net tax-supported debt is prepared for the bond commission every January, but Boicourt said the information should be updated and presented quarterly
The state will also be able to take to market in fiscal 2013 a single $225 million tranche of road bonds dedicated to upgrading roads in rural parishes and two $85 million tranches of bonds supported by the treasury's unclaimed property fund.
The unclaimed property bonds will help fund completion of a north-south interstate highway through Louisiana. The fund includes utility service deposits, paychecks, and other assets that were not claimed or cashed.
JPMorgan was named senior underwriter on the unclaimed property bonds. Co-managers include Drexel Hamilton, Stephens Inc., and Morgan Stanley & Co.
Foley & Judell Inc. is bond counsel.
The commission also approved a $227 million refunding of state GO bonds and a $176 million refunding by the Louisiana Transportation Authority.