DALLAS - With the money running out within weeks, Louisiana officials have yet to agree on a structure for issuing $485 million of fuel tax bonds that would finance constitutionally mandated road projects.
Treasurer John N. Kennedy said Monday that top officials are meeting regularly to how to issue the bonds for the state's $5.2 billion Transportation Infrastructure Model for Economic Development program known as TIMED.
"We have not decided on a structure," said Kennedy, who also serves as chairman of the State Bond Commission. "We do have to do something, because the funds will run out May 1. We might be able to go a little past that, but not much."
The state's top officials are involved in the talks, Kennedy said.
"We are meeting regularly with the governor, the president of the Senate, the speaker of the House, and the Division of Administration to come to some solution," he said. "We are looking at a number of options, including fixed, floating, or variable debt backed by a letter of credit, a fixed-rate taxable issue, or maybe the new [Build America Bonds]."
Louisiana is also facing a swap-termination fee that could be more than $100 million on a forward floating-to-fixed interest rate swap agreement reached in December 2006 on the $485 million of TIMED bonds. The state entered into the swap to lock in a rate of 3.602% for the bonds that were envisioned as auction-rate debt enhanced with bond insurance. In November, the swap counterparties agreed to extend the deadline from Dec. 1, 2008, to May 1.
State highway officials told a legislative committee in February that the available funding would run out in May, but that they intended to temporarily shift funding from other projects to avoid having to terminate ongoing contracts on June 1.
The agenda for Thursday's meeting of the State Bond Commission includes a resolution for the sale of $485 million of fuel-tax revenue bonds, and three resolutions setting parameters for fuel-tax revenue bond issues of unspecified amounts. Two of the proposed 2009 series would be second-lien authorizations.
TIMED was approved by voters in 1989 as a constitutional amendment authorizing a pay-as-you-go transportation capital program. The voters later approved a measure allocating four cents of the state's 20 cent-per-gallon gasoline and fuel tax to support bonds to speed up the effort.
The 16 projects to be funded were included in the constitutional amendment, giving state highway officials little or no leeway in tailoring the scope of the effort to the money that is available. The initial cost estimate of the program provided to voters in 1989 was $1.2 billion.
All the TIMED bonds must be sold by Dec. 31, 2010. In addition to the $485 million being considered Thursday by the Bond Commission, the schedule calls for a final sale of $500 million in 2010. When all the authorized bonds are issued, Louisiana will have issued $3.3 billion of debt for the TIMED program.
William Ankners, director of the Louisiana Department of Transportation and Development, told a legislative committee in February that the authorized bonds will not be sufficient to complete the TIMED program, and that the allocated gasoline-tax revenue will not be sufficient to support the authorized debt.
If the dedicated revenue will not provide the needed debt service, Ankners said, the state would have to draw upon the revenue from the 16 cents per gallon tax that currently goes into the Transportation Trust Fund.