DALLAS — Louisiana’s community college system will be able to issue $200 million of revenue bonds for facility improvements in early 2008 under a plan approved yesterday by the State Bond Commission. The commissioners overrode staff objections to approve the bond sale by the Louisiana Community Development Authority, which will issue the bonds on behalf of the Louisiana Community and Technical College System Facility Corp.The Louisiana Community and Technical College System will lease the bond-financed buildings with money provided through annual legislative appropriations.The bonds were authorized by the 2007 Legislature with a bill that was co-sponsored by 23 state senators and 83 representatives and approved unanimously in both chambers. The proceeds will finance 23 projects at the system’s 14 institutions.The system expects to sell the bonds in February or March 2008, possibly in a single tranche.Commission director Whit Kling Jr. said the staff did not oppose the projects being financed but was concerned that the sale of the community college bonds would seriously deplete the state’s debt capacity. Louisiana has a constitutional limit on net tax-supported state debt, which by law has been set at 6% of annual revenue. Before the state Revenue Estimating Conference last week boosted its estimate of Louisiana general fund revenues in fiscal 2008 by more than $650 million, Kling said the state would have only enough remaining debt capacity to issue $92 million in debt. With the upward revision, he said, there is sufficient capacity for the college bonds but the remaining capacity would not be sufficient to meet the state’s needs.“Debt service on the college bonds will require the state legislature to appropriate $15.8 million every year for 31 years,” Kling said. “There is enough capacity now for these bonds, but I want to make you aware that it could affect capital outlays as we go forward.”With the revised revenue projections, Kling said, the state has an additional $20 million to $25 million for debt service, which he said raises Louisiana’s debt capacity by some $300 million.Kling said the Legislature has authorized $901 million of cash lines of credit for capital outlays, which will require a debt sale of at least $200 million in fiscal 2009 to meet the cash requirements.“There is $150 million in the capital outlay escrow account, and it will be depleted in the first quarter of fiscal 2009,” he said. “At some point we have to take out some of those cash lines of credit with real cash.”However, commission member and state director of administration Jerry Luke LeBlanc said his department’s assessment of the increased revenues and the cash and non-cash lines of credit for capital outlays indicates the debt capacity could be increased by $500 million to $600 million. “There are millions of dollars in capital outlay projects on the books that won’t be spent next year, and some will never happen,” he said. Breaking the 6% cap on state-supported debt would draw the negative attention of bond rating agencies, Kling said.“When it comes time to rate these bonds, the agencies will be concerned that the state is not adhering to its own debt management policies,” he said. Sen. Robert Adley, a member of the Bond Commission and vice chairman of the Senate’s revenue and fiscal affairs committee, said the 6% level was an arbitrary guideline. The law setting the limit also allows the Legislature to exempt a measure from the debt capacity limit by a two-thirds vote. The bill authorizing the bonds passed unanimously, he noted.“The 6% limit does not affect these bonds,” he said. “It was made clear to every senator and every representative that this was outside the debt limit.”In other action, Kling said the state has allocated all but $1.3 billion of its $7.8 billion of Gulf Opportunity Zone bond capacity. The remaining capacity is reserved for projects in the hurricane-affected areas of Orleans, St. Bernard, Cameron, and Washington parishes.
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