John Schroder 121417 b

State Treasurer John Schroder opens his first Bond Commission meeting as chairman on Thursday, Dec. 14, 2017. Senate President John Alario, R-Westwego, is to Schroder's right.

Without looking at the bids from two of the nation’s largest banks because of their corporate gun policies, the Louisiana Bond Commission approved Thursday hiring Wells Fargo and JP Morgan to underwrite financing for highway projects.

So how much extra will Louisiana taxpayers pay for the principled stand the Bond Commission took on the Second Amendment?

The full answer is complex. But the short answer is about $25,595 more in fees for a $90 million bond and $34,666 more in fees for a $125 million bond.

Lela Folse, the panel’s director, said that on orders of the Bond Commission, she and the graders of 11 proposals did not even look at the bids submitted by Citigroup Inc. and Bank of America Merrill Lynch.

A review of those disregarded bids shows that both bank sought less fees than the winning bidders.

“It means when the treasurer and attorney general said there was no cost to state (for banning participation of the two banks), they either didn’t know or were incorrect,” said Matthew Block, the governor’s representative on the Bond Commission and an opponent to tying the contracts to politics.

Block said the differences are not that great between the fees of the winning bidders and the two banks whose proposals were not reviewed, Block said. That's because the work on GARVEE bonds is largely administrative. But come February, the state will be issuing more than $300 million worth of general obligation bonds where the costs are based on interest rates that taxpayers pay and the nation’s largest dealers in government financing instruments may not be able to participate again.

“There are millions of dollars on the line,” Block said after the meeting. “We’ve potentially tied one of our hands behind our back.”

Because Citigroup and Bank of America adopted policies that limited business relationships with sellers and manufacturers of firearms, a 7-6 Bond Commission excluded them from participating in financing a plan to widen Interstate 10 in Baton Rouge and improve access into the Louis Armstrong New Orleans International Airport, along with a project near Bossier City.

"We have a very capable group of underwriters, and some of the biggest banks in America wanted to participate in this deal," Treasurer John Schroder tweeted after the Commission approved Wells Fargo and JP Morgan.

Twenty-six other states have used Grant Anticipation Revenue Vehicle, or GARVEE bonds, for road projects. This is Louisiana’s first time using the funding mechanism that raises up-front money for construction costs that is repaid over 12 years using annual federal transportation grants.

Wells Fargo & Co. and JP Morgan didn't have the lowest fees among the 11 bidders. But they scored one/two in categories such as experience, track record, marketing strategy, identification of specific transaction structuring issues and other criteria.

The 11 bids proposed fees from $126,360 to $293,400 for a $90 million bond that would fund construction on access directly from I-20 to Barksdale Air Force Base near Bossier City. Wells Fargo could do the work for $144,765. JP Morgan wants $155,070.

For a $125 million bond solicitation that would cover an I-10 interchange to serve the new terminal at the New Orleans airport, the fee bids ranged from $172,644 to $366,250. Wells Fargo wants $199,175 and JP Morgan wants $211,875.

Treasurer Schroder has said the final price will be negotiated.

According to its unread bid, Citigroup sought $129,475 for the work on the Barksdale access and $177,209 to handle the financing for the New Orleans airport access. Bank of America wanted $131,656 in fees for the $90 million bond and $178,904 for the $125 million bond.

The Bond Commission hasn’t decided which bond – $90 million or $125 million – to sell first.

Another bond of about $360 million will be sold around June 2019 to cover adding another lane and upgrading ramps on I-10 between the Mississippi River bridge and the I-10/12 split in Baton Rouge.


Follow Mark Ballard on Twitter, @MarkBallardCnb.