DALLAS — Sales are sluggish for Gulf Opportunity Zone bonds approved by the Louisiana State Bond Commission, with some parishes reporting only minimal sales for the bonds intended to help Gulf Coast states in hurricane recovery efforts.
Louisiana received an allocation of $7.94 billion of the tax-exempt private-activity bonds under the 2005 federal act, along with $200 million of GO Zone tax-credit bonds. The bonds are part of the recovery effort from hurricanes Katrina and Rita, which hit the state in 2005.
The bond commission has approved the sale $8.9 billion of the bonds for projects across the state, but sponsors have returned $2.2 billion, and another $1.74 billion of authorizations became available again when they did not sell within the specified period set by the commission.
Commission director Whit Kling Jr. told commissioners at yesterday’s monthly meeting that only $55 million have been sold of the $1.6 billion of GO Zone bonds approved for Orleans Parish, which encompasses New Orleans.
The GO Zone program will expire Dec. 31, 2011. Kling said there are indications that Congress is considering extending the program, but there has been no action.
As of June 30, Kling said, GO Zone sales for Louisiana projects totaled $4.97 billion.
Commission members yesterday didn’t discuss why sales of the bonds have not been stronger but market observers have said the deals can be a tough sell given current tight market conditions for anything without a top-notch rating.
In 2008, the bond commission established two bond eligibility pools, a dedicated one for the 13 parishes hardest hit Hurricane Katrina with 18 less-severely affected parishes in a competitive pool. Kling said there is $1.1 billion remaining for the hardest hit areas, and $20 million in the competitive pool.
The commission has given final approval to $4.8 billion of bonds for the most severely damaged parishes, but allocations totaling $1.67 billion have been returned because they did not go to market. The competitive pool has been allocated $4.15 billion, with returns totaling $532 million.
The pool structure will collapse at the end of the year, with remaining allotments available to projects in any of the 37 parishes eligible for GO Zone bonds. Extending the separate pools would be up to the commissioners, Kling said.
The commission yesterday approved the sale of some $500 million in state general obligation bonds, with the proceeds used to reimburse the state for lines of credit on high-priority state building projects that have been completed.
Jerry Jones, director of the Office of State Facility Planning and Control, said the bonds will reduce the backlog of capital projects to $1 billion.
Commissioner of Administration Angèle Davis, who is a member of the bond commission, said the state GO bonds are set to go to market in September or October. Louisiana’s GO bonds are rated A1 by Moody’s Investors Service, and A-plus by Standard & Poor’s and Fitch Ratings.
The commission also approved the sale of $21.4 million of taxable qualified school construction bonds by East Baton Rouge Parish School Board. According to stipulations in the request, the 16-year bonds will bear at most an interest rate of 1.25%.
Kling said the school bonds are part of the $131.6 million of the federally authorized bonds specifically allocated to four districts in the state this year. Another $100 million of the bonds are available to other districts in the state, he said.