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A map shows the possible changes to the Perkins Overpass area, Tuesday, August 28, 2018, as the state hosts the first of three public meetings on the $360 million plan to widen I-10 from Mississippi River bridge to I-10/12 split in Baton Rouge, La.

A special committee is grading bids from banks to handle $600 million worth of financing for highway improvements – but not from the nation’s two largest underwriters.

They were excluded because of gun sales policies.

Tossing proposals from Bank of America Merrill Lynch and Citigroup could cost Louisiana taxpayers more, as trade publications suggest, or it might not, as state Treasurer John Schroder contends.

“This is a negotiated deal. We’re pretty confident we might not see anything more, but nobody knows,” Schroder told The Advocate Wednesday.

Even it does cost marginally more to sell the bonds, more important is the statement that Louisiana won’t do business with banks that would deny 2nd Amendment constitutional rights, he said.

In the wake of high profile mass shootings, including the Feb. 14 murder of 17 people at a Parkland, Fla. high school, Citigroup announced it would no longer do business with retailers peddling high capacity magazines or selling guns to anyone who hasn’t passed a background check or is under the age of 21 with a few exceptions. Bank of America no longer will loan money to manufacturers of military-style weaponry for the public.

Attorney General Jeff Landry called the corporate policies “fascism at its best.” A Citi executive said the guidelines are like the protocols large retailers adopted on their own.

The state hopes the bonds will raise enough money to widen Interstate 10 in Baton Rouge, provide easier access to Louis Armstrong New Orleans International Airport, and improve the entry into Barksdale Air Force Base near Bossier City.

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.

The mechanism was put in place with 2015 legislation by then Baton Rouge Republican Rep. Darrell Ourso, who wanted funding for an additional bridge across the Mississippi River in Baton Rouge. In a 2016 analysis of Louisiana’s road problems, CitiGroup recommended using GARVEEs for other interstate projects.

Graders are individually reviewing proposed costs, services and strategies from the 16 other banks applying for the work. They represent the House, Senate, the Governor’s office, the state Department of Transportation & Development, among others. Treasury staff will tally the grades and make a recommendation to the Bond Commission, perhaps in September.

The Bond Buyer, a trade publication, wrote that the ban on the two banks “could mean higher borrowing costs for the state as it prepares to sell GARVEEs for the first time.”

But the Bond Commission didn’t discuss possible financial repercussions of their actions in the meetings prior to the 7-6 vote on Aug. 16.

Commissioners did, however, receive an analysis from the state’s financial advisor, Renee Boicourt, of Lamont Financial Services Corp. of New Jersey. She didn’t return a reporter’s calls.

For the commissioners, according to an email to one of them, Boicourt likened excluding the two largest firms – together they hold a third of the bond market – with trying to sell a home without the help of the two largest real estate brokers. “You would probably not get the best possible price for your house.”

Also, GARVEE bonds have a secondary market, which can be impacted by not allowing the two largest banks to participate. The price of the bonds is partially influenced by the investor’s ability to resell the loans. Without Bank of America or Citi, investors may feel more risk and “they will buy the bond at higher yields, i.e. a lower price, to avoid potential market losses,” an email stated, meaning Louisiana taxpayers will pay more.

Citi and Bank of America already underwrites about 23 percent of the state’s bond business.

Citi handled the financing of safety additions on the Causeway, improvements on Tiger Stadium, and the new terminal complex at the Louis Armstrong New Orleans International Airport.

Bank of America won the bids for the state’s last three major general obligations bonds, worth $653.3 million.

The two have won competitive bids on 11 of 29 state bond deals with a market value of $2.67 billion between 2013 and 2017.

On a national level, Bank of America and Citi handled 447 bonds worth more than the next four players put together in the first half of 2018 alone, according to Thomson Reuters.

“Intuitively, if you eliminate the top two players, to some extent you eliminate competition. It will have some impact around the edges,” Alan Schankel said in an interview. He is Managing Director and Municipal Strategist for Janney Montgomery Scott LLC of Philadelphia.

“But it wouldn’t be that significant,” he added.

GARVEEs are unlike general obligation bonds, for which underwriters compete and, generally, the one with the lowest interest rate wins. With GARVEE bonds, the banks act more like managers who put the deals together with the insurance companies, retirement funds, mutual funds and other large investors that purchase the loans.

If the impact is 1 basis point, or 100th of 1 percent, then Louisiana taxpayers will have come up with an additional $60,000 a year or $720,000 over the 12-year life of the loan, Schankel said, attempting to put perspective on the numbers involved. When talking about $600 million, it’s not that much, he said.

But any estimate is just a guess at this point. GARVEE bonds vary a lot from state to state and there’s little data that provide relevant comparisons, Schankel said.

House Speaker Taylor Barras, a New Iberia banker and member of the Bond Commission, said moments after voting to exclude Citi and Bank of America, that the condition of the market at the time the bonds go on sale will have the biggest influence on the price. Generally, when the stock market is doing well, underwriters find it harder to sell the safer but less profitable bonds.

Under the current plan, the first sale will take place in January or February 2019 for about $100 million to provide access directly from I-20 to Barksdale Air Force Base.

A few months later bonds will be sold to cover about $125 million needed for an I-10 interchange to serve the new terminal at the New Orleans airport. Then about $360 million would be sold around June 2019 to cover adding a third 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.