DALLAS – The Louisiana State Bond Commission approved a streamlined process Thursday for selling $325 million of state highway revenue bonds in hope of getting the issue to market while interest rates are in a valley.
The bonds should be issued by the end of 2012 to take advantage of historically low rates, said Director Whit Kling.
“We want to have the professionals in place so we can move forward quickly when the project list and drawdown schedule has been completed by the Department of Transportation and Development,” he said. “We need to hit the market before the end of this calendar year.
“I believe interest rates will go up after November,” Kling said.
The Commission gave the authority to issue requests for proposals from bond counsel and underwriters on the bonds and sign contracts for those services to Kling and financial advisor Lamont Financial Services Inc.
An evaluation subcommittee of Treasurer John N. Kennedy and other members of the Bond Commission will review the applications.
Kennedy said he would like to see the bonds sold as early as possible and no later than the end of September.
“August is out,” he said. “All the rich folks in New York City go on vacations in August and you can’t sell bonds then.”
The Bond Commission approved a plan by New Orleans to refund up to $170 million of general obligation bonds. The city hopes to issue the bonds in early July.
The refunding is expected to provide $20 million of net present value and cash flow savings of $26 million.
The $325 million of state highway revenue bonds were authorized by the 2012 Legislature, with the proceeds dedicated to maintaining and upgrading more than 1,000 miles of rural state roads in every parish but Orleans Parish.
The bonds will be supported by half of the annual revenue currently going to the state highway improvement fund. The fund receives $50 million to $60 million a year from driver’s license fees and commercial vehicle registrations.
Kling said the state must decide whether to issue the 20-year bonds in a single tranche or stick to the original sales schedule of $100 million tranches in fiscal 2013 and 2014, with a final $125 million issue in fiscal 2015.
“Do we sell them all now while interest rates or low, or take the risk with the annual sales?” Kling said.
Michael Bridges, undersecretary of finance and management at DOTD, said the drawdown schedule, or when proceeds are needed to finance specific projects, depends on the structure of the bond issue.
In questioning by Rep. Jim Fannin, D-Jonesboro and a commission member, Kling contended that the structure of the bond issue depends on the transportation department’s drawdown schedule.
“I wanted to hear y’all say you will work together to get these bonds to market rapidly, and I think that is what I heard,” Fannin said. “I hope that is what I heard.”