DALLAS - New Orleans' recovery director said yesterday that bond-financed projects in the city are viable despite sluggish sales of Gulf Opportunity Zone bonds dedicated to economic restoration efforts.
Edward Blakely, director of Mayor Ray Nagin's Office of Recovery and Development Administration, told the Louisiana State Bond Commission that developers of more than 40 projects approved by the commission have closed on only 4% of the $1.3 billion of GO Zone bonds allocated to Orleans Parish.
Blakely said that he expects a flurry of activity in the next three months, with up to $420 million of the allocated bonds coming to market within the next 90 days.
"Some of the projects have not gone forward, and they are being re-sized and re-looked at," he said. "Now that the market is coming back, some that were approved earlier will be amended, and some new applications for GO Zone bonds will be filed."
Blakely said GO Zone bond allocations approved by the Bond Commission that are expected to be marketed soon include a $225 million hotel project in downtown, a $100 million hospital project in east New Orleans, and a $140 million rental car facility at Louis Armstrong New Orleans International Airport.
Several developers are finding it hard to sell the bonds in the current debt market, Blakely said, and others have become discouraged by the city's slow economic recovery.
GO Zone bond allocations for New Orleans that have not been issued by the end of 2009 will be returned to the financing pool and become available for eligible projects across the state. The federally approved bond program is to expire at the end of 2010.
There is approximately $800 million of unallocated bond capacity from the $1.3 billion available to Orleans Parish.
"We intend to use the full allocation, even in these tough economic times," Blakely said.
Bond Commission director Whit Kling Jr. said there have been no closings of GO Zone bonds in Orleans Parish for the last 90 days, and none in the last six months in Iberia, St. Bernard, Terrebonne, Vermillion, and Washington parishes.
The commission gave preliminary approval to two GO Zone applications submitted by the New Orleans Industrial Development Board. They include a $100 million redevelopment of an existing office building to include residential units and retail space and a $9 million warehouse facility.
The commission also approved requests for $300 million of GO Zone bonds for a container ship transfer facility on the Mississippi River in Plaquemines Parish and for $100 million of bonds to expand a chemical manufacturing facility in Ascension Parish.
Work is continuing on resolving the state's negative position on swaps associated with a $485 million bond sale for the TIMED highway program, Kling said, but no solution has been determined.
The swap agreement would have cost Louisiana $25 million to $30 million in October 2009, but Kling said the latest estimate is $179 million.
"That's better than it was last week," he said. "Last Wednesday it was $229 million. But based on long-term values, the market is getting worse."
The state must sell the bonds by May, Kling said, or the $4.9 billion highway program will run out of money.
"We continue to review our options, and evaluate the alternatives," he said. "I have to tell you, the market is tough."