Amid all its fiscal turmoil, the state of Louisiana is running out of money for its construction projects and will try Wednesday to raise $335 million on the New York financial markets.
Otherwise, some of the state’s construction projects will run out of money this month, others can make it for a few months, but all the funds will be gone by September, according to the Treasury Department.
“We’ve got to go raise the money. We don’t really have a choice,” State Treasurer John N. Kennedy said in an interview Tuesday. “They’re burning through capital outlay money like it was West Virginia ditch water.”
Generally, governments raise money for construction projects — capital outlay in government-speak — by selling bonds. The proceeds are spent then repaid over time with interest using taxpayer dollars. Large financial houses bid on the bonds for investments and resale.
The State Bond Commission usually picks the bidder offering the lowest interest rate. Bidding for this sale begins at 10 a.m. Wednesday.
But it may not be the optimum time for Louisiana state government to sell bonds.
“I feel like the market ought to give us some credit for the Legislature having worked so hard in taking the problem of our deficit so seriously,” said Kennedy, who chairs the State Bond Commission. “I’m hoping for the best. What’s going on in Louisiana right now is no secret.”
The institutional investors who purchase bonds know about the state’s $1.6 billion budget deficit, with no consensus on solution in sight, he said. The financiers also know about the credit worthiness warnings about some state universities that were issued last week; the funding gap with public-private partnerships running the charity hospitals; and what Kennedy calls “the LSU bond sale debacle” two weeks ago, in which the university suspended its sale of bonds because of investor worry over financial news.
“We disclosed everything, warts and all,” Kennedy said. “We have to.”
The $335 million being sought Wednesday would cover 279 projects, mostly to reimburse contractors for work already done, according to the Division of Administration.
The projects include:
University Medical Center in New Orleans: $71.5 million
Interstate 12 widening from O’Neal Lane to Walker/Satsuma: $4.38 million
Business development megaproject site preparation statewide: $18.34 million
North Louisiana Criminalistics Lab in Shreveport: $6 million
University of Louisiana at Monroe Sandel Hall renovation: $6.5 million
Audubon 2020 exhibits in Orleans Parish: $1.68 million
Commissioner of Administration Kristy Nichols opted not to comment before the bond sale, her press secretary said.
The money would replenish capital outlay funding that is expected to run out this month for projects by Legislative Budgetary Control, Military Affairs, Community Development, Economic Development, Coastal Protection, and Stadium & Exposition District agencies, according to the Treasury Department.
Facility Planning and Control, which handles the construction of state buildings, should have money through July.
The Department of Transportation and Development has sufficient funds to cover its capital outlay needs over the next five months.
The entire capital outlay fund runs out of cash in September.
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