Louisiana will borrow $100 million to repair and improve rural roads around Louisiana, in a plan scaled back Thursday by state officials grappling with a shortage of construction funds and trying to stay under the state’s debt ceiling.
The Bond Commission agreed without objection to sell bonds to investors for upfront cash for road work in 37 parishes. But the plans were cut from $250 million to $100 million because of concerns about breaching the debt cap.
Commission member Rep. Jim Fannin sponsored the bill that authorized the rural road borrowing and pushed for the bond sale – even at the smaller size.
“It’s not just rural roads. It’s about putting people to work and doing the right thing for the state,” Fannin, D-Jonesboro, said.
The dollars will pay for construction on roads not eligible for federal matching money in the highway program. The debt will be paid off with registration and license fees and taxes on commercial trucks and trailers.
Commission members reduced the rural road borrowing as part of overall discussions of how to deal with a shrinking pool of funds for construction work and with a limited amount of borrowing capacity remaining under the state’s constitutional debt limit.
The state borrows money to pay for construction projects through bond sales to investors, with the debt paid back with interest over decades.
That pool of funding, which pays for items like road improvements, college building repairs and economic development projects, is running dry. And the state is teetering so close to its debt ceiling that the ability to borrow more is limited.
The construction project fund will run out of cash within five months, said commission director Whit Kling.
He said the state has enough borrowing capacity under the state debt limit to keep construction work going for another nine to 12 months with another bond sale.
But he warned that without a multiyear plan to restructure the debt, the state will be on track to breach its ceiling in the 2014-15 budget year if it borrows up to its full capacity in the next few months.
“You can address the liquidity issue now … but if you don’t address the structural imbalances and the legal constraints with a work-out plan, you’ll hit the wall. You will not be able to issue any more debt,” Kling told the commission.
The funding crunch stems from lawmakers and governors approving $1.1 billion more in lines of credit for construction work over the last 12 years than they borrowed or appropriated money to pay for, Kling said.
Meanwhile, stagnated state income and the economic downturn kept the debt limit lower than expected. The limit requires that the state’s annual debt-repayment requirements fall under 6 percent of the state’s yearly income from taxes, licenses and fees.
The Jindal administration, top lawmakers and Treasurer John Kennedy – all members of the Bond Commission – planned to discuss ways to refinance and restructure Louisiana’s existing debt to keep the state clear of breaching its debt limit.
Kennedy, chairman of the commission, said he expects the panel next month to consider a bond sale to keep the construction fund filled with enough money to avoid projects grinding to a halt.
“I will feel a lot better when we know that we have enough money in the account to get us through the year,” he said.
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