The state Bond Commission put the Legislature on the hook Thursday for repaying $35 million in borrowing for steel producer Nucor Corp.
The commission’s action means the legislators will have to come up with as much as $975,382 by next summer to pay the first installment on the bonds.
As the project proceeds, so will the state’s debt service obligations, reaching as much as $4 million in the 2012-2013 state fiscal year. The state will have nine years to repay the money.
Lt. Gov. Jay Dardenne told the legislators on the panel to pay attention. He said the commission essentially obligated the Legislature to appropriate the money by approving the borrowing arrangement.
“This is a great project. We all want to see it go forward. But I just raise this concern,” Dardenne said.
State Rep. Jim Fannin, D-Jonesboro, and chairman of the House Appropriations Committee, said afterward that he knew dollars would have to be scrapped together for the project during tough economic times for the state.
“(It) don’t make me like it,” Fannin said. “But I was aware of it.”
Nucor Corp. broke ground in March on the first of five phases of a steel and iron plant in St. James Parish.
The state offered a number of incentives to lure the North Carolina steelmaker to build in Louisiana. The project will be built in phases. If all phases are completed, the facility eventually will employ 1,250 people.
Those incentives included $160 million in state performance-based financial assistance, $600 million in Gulf Opportunity Zone bonds and $30 million in state construction dollars.
Nucor is responsible for repaying the $600 million in Gulf Opportunity Zone bonds. The $35 million in borrowing approved Thursday also are through the special, low interest bonds set up by Congress to spur recovery from the 2005 hurricanes, but the state will be responsible for repaying them.
The bonds will be issued to St. James Parish with the state undertaking the debt service obligations.
The bond commission’s director, Whit Kling, said he expects the state to borrow an additional $100 million to pay incentives to Nucor.
State Department of Economic Development Secretary Stephen Moret said the state Bond Commission was briefed on the incentive package.
“What confused folks today was not the incentive package itself, but rather that the financing experts recently suggested a payment schedule that resulted in an initial payment earlier than was originally planned,” Moret said.
The state is experiencing financial problems, partly because federal revenue is decreasing. The state also is suffering from diminished income because of tax breaks.
Fannin said the Legislature will honor the commitment that was made to Nucor.
“We don’t have an option except to come up with it,” he said.
Discomfort over the incentives is not limited to the state level.
Some St. James Parish officials have expressed uneasiness about local sales tax exemptions and the division of special school system payments.