DALLAS - The sponsor of a proposed film studio complex in West Baton Rouge Parish that received an allocation of Gulf Opportunity Zone bonds in early 2007 from the Louisiana State Bond Commission is suing the agency after being denied an extension of its $250 million bond allocation.
Studio City Louisiana LLC filed suit on April 7 in the 19th Judicial District of East Baton Rouge Parish, one day before it would have had to issue its bonds or return its allocation to the bond commission for redistribution to other projects. The commission on April 3 rejected Studio City's request for an additional 30 days shortly after adopting a new rule that allowed extensions upon payment of a fully refundable deposit of 0.5% of the requested allocation.
The suit alleges the commission adopted the rule without the required public notice, making it illegal. The rule "substantively changes and shortens the deadline for closing" on GO Zone bonds, the suit said.
The court is asked to declare the new rule "null and of no effect." The plaintiff also wants an injunction to prevent the State Bond Commission from enforcing the rule against Studio City.
The Bond Commission and 12 of the 14 members are named as defendants in the suit. Among those listed are Gov. Bobby Jindal, Lieut. Gov. Mitch Landrieu, Attorney General James D. Caldwell, Senate President Joel T. Chaisson II, House Speaker Jim Tucker, and Division of Administration Commissioner Angèle Davis.
State Treasurer John Kennedy, who is head of the Bond Commission but was not named in the lawsuit, was unavailable for comment before press time on Thursday.
Michèle LeBlanc, senior partner in the art and entertainment law group of LeBlanc & Associates, who is representing Studio City, said the bond commission's new GO Zone bond rule is based on insider politics, not economics.
"The Bond Commission broke about every law in the book, even their own, on making rules with that action on April 3," she said. "You have to publish an advance notice and publish the rule. You can't just say, 'Here are some new rules,' wave your hands around, and make them legal.
"Nothing has changed in this state," LeBlanc said. "It is the same old Louisiana and the same old politics. It's all about helping your friends and hurting your political enemies."
Economic Development Secretary Stephen Moret presented the revised policy at the commission's special meeting on April 3. He said the existing system "involved some complex procedures and rules that have shifted over time, confusing and disappointing some stakeholders." The commission adopted the new policy at that meeting.
Studio City Louisiana received authorization from the commission for $250 million of GO Zone bonds, to be issued by the Louisiana Government Environmental Facilities and Community Development Authority, on Feb. 15, 2007.
Shortly thereafter, then-Gov. Kathleen Blanco issued an executive order requiring a letter of approval from the governor's office before GO Zone bonds could be issued. She then stopped issuing letters of approval on the grounds that a new priority system was needed because housing and infrastructure projects were not getting a fair share of the state's $7.8 billion GO Zone bond capacity.
Then-Attorney General Charles Foti ruled in September that the governor's executive order conflicted with the federal law establishing the GO Zone bond program. The orders were officially withdrawn by Jindal on April 7.
LeBlanc said the lengthy moratorium on GO Zone bond approvals meant Studio City lost an opportunity to issue debt in a favorable market.
"This whole thing has been a nightmare," she said. "Our project was ready to go, we had a buyer for the bonds, and then the governor inserted herself into the process.
"The buyers backed out, and I don't blame them," LeBlanc said. "They can't wait for a year while the governor decides what to do.
"We lost seven months and then when we were ready to go, the whole bond market hit the skids," she said. "Right now, we are taking the position that we can sell the bonds at any time before the federal deadline of 2011, and the state can't stop us."
The Studio City complex is expected to cost $495 million. It will consist of eight television and film sound stages on 135 acres along the Mississippi River, along with post-production and support facilities, rehearsal areas, and offices.