The Louisiana senate Monday approved a bill authorizing $251.6 million of off-the-book lease revenue bonds to fund new facilities for the Louisiana Community and Technical College System.
The measure stipulates that the LCTC bonds will not be considered net state-tax supported debt, which avoids the constitutional cap on state debt.
Annual debt service on state tax-supported debt is limited to 6% of estimated annual revenues during the term of the bonds. The Legislature can exempt debt from counting against the limit by a two-thirds vote.
Senate Bill 204 was sent to the House by a 30-to-6 margin.
Proceeds cannot be spent on the projects listed in the bill until July 2015, and each project requires a private match of 12%.
New facilities for the community college system would normally be funded through the state’s capital outlay program, but system officials said that process is too slow to meet the growing demand for technical education in Louisiana.
System president Joe May told legislators that the capital outlay has funded only $12 million of projects at LCTCS campuses since 2001. In that same period, he said, the system has funded 43 construction projects with $350 million of alternative financing.
The capital outlay process is better suited to funding small-scale maintenance efforts, May said, not major building projects.
State Treasurer John N. Kennedy said the college bonds will be supported by state taxes and will be considered a cap-buster by bond rating agencies. If the state’s credit suffers as a result, he said, Louisiana’s debt will get more expensive.
“It’s an insult to every tax payer in the state,” Kennedy said. “I support the community college system, but if we give them bonds we’ll have to do the same for Louisiana State University and Southern University.”
Debt service on the bonds is estimated at $20 million a year, beginning in fiscal 2016. The Louisiana Local Government Environmental Facilities and Community Development Authority will issue the lease-revenue bonds.
The Legislature authorized $200 million of bonds for the community and technical college system in 2007.
