BATON ROUGE (AP) — Under a plan approved Thursday, Louisiana will use a $255 million short-term bridge loan to pay for ongoing construction projects amid deep state budget troubles that could make traditional long-term borrowing more expensive.
Without new money, Treasurer John Kennedy said, the state likely would run out of funds for the economic development projects, roadwork, building repairs and other construction in March or April at its current spending rate of $45 million a month.
"We're getting low on cash," Kennedy said.
The Bond Commission and the Joint Legislative Committee on the Budget agreed, both panels without objection, to use the short-term financing to keep dollars flowing to the construction work.
Louisiana traditionally finances items in the state construction budget by selling bonds to investors for upfront cash, with the debt paid off over decades.
But the state's financial adviser, Renee Boicourt with Lamont Financial Services Corp., had warned that the state's budget uncertainty could worry investors and force up interest rates, making long-term borrowing more costly.
Boicourt called the bridge loan "the most advantageous strategy for the state."
When he takes office in January, Gov.-elect John Bel Edwards is inheriting state financing gaps topping $200 million for the current budget year and a more than $1 billion shortfall on the horizon for next year.
Short-term bridge financing gives the new governor and new Legislature time to work through the state's budget problems rather than locking in a decades-long interest rate with the state's finances still in disarray.
Rep. Jim Fannin, R-Jonesboro, chairman of the budget committee, said he thought it was the right approach to make sure "there's no slowdown, it all moves smoothly" in construction work.
The mechanism to be used involves what is called a bond anticipation note. The state will sell the note for an infusion of cash and have up to a year to pay the money back. Boicourt said the state is negotiating with three possible lenders and expects the interest rate to be below 1 percent. A final deal is expected to be settled in January.
This summer, Kennedy said, the state will sell general obligation bonds to pay off the bond anticipation note and pour new money into the construction account.
"Hopefully, by June, things will be settling down," Kennedy said.
The treasurer said that the last time Louisiana used similar short-term financing was in 1987.
– by AP Reporter Melinda Deslatte
