BATON ROUGE, La. (AP) — Louisiana will borrow $335 million next month to replenish its construction project fund and keep the money from running dry in June, amid warnings the state could run into a cash crunch in early 2016.
The State Bond Commission agreed to the borrowing plan Thursday without objection. The state will sell bonds in May to investors for upfront cash to pour into the fund that pays for road work, economic development projects, building repairs and other construction.
The borrowing, to be paid off over decades with interest, will keep work humming on state-financed construction projects through February. But the state's financial adviser said Louisiana could face cash flow problems for projects next year, because of borrowing limits tied to the state's debt ceiling.
"The rate at which we're spending is burning through cash faster than the capacity we have to replenish," said Renee Boicourt, with Lamont Financial Services Corp.
Treasurer John Kennedy, chairman of the Bond Commission, said the state's next governor won't have enough money to pay for all the projects given lines of credit by Gov. Bobby Jindal's administration.
Jindal is term-limited, and his successor will be elected this fall and take office in January. After the May bond sale, the administration will have committed Louisiana to about $800 million more in projects than the state has money on hand to pay for.
"The new governor will have a decision to make," Kennedy said. "This means some of these projects aren't going to get done or some of them are going to get done in 2067."
Jindal's top budget architect, Commissioner of Administration Kristy Nichols, said Louisiana has the borrowing capacity to stay on track with construction work as long as it continues to tightly manage the projects and spending.
"We manage it project by project. We don't have a debt capacity issue under the schedule we've worked out with the Bond Commission staff," Nichols said after the commission meeting.
Louisiana has a limited amount of room to borrow under its debt limit. The cap, enacted in the early 1990s, requires that annual repayment requirements fall under 6 percent of the state's revenue forecast. If revenues go up, the state gets more breathing room under the debt limit. But if they fall, the situation becomes more difficult.
Kennedy said with current state revenue projections and debt levels, the next governor could borrow about $265 million after coming into office — less than the usual borrowing level.
Boicourt said Louisiana is coming to a "choke-point" next year that will need close monitoring and planning to keep money flowing to projects and stay below the state debt ceiling.
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Posted on Tue, April 7, 2015
by Melinda Deslatte, Associated Press