by Will Sentell
Capitol news bureau
August 14, 2012
State Treasurer John Kennedy said Monday the state should consider selling all of its $325 million rural roads bond package because of low interest rates that may not last.
“My advice would be go get these bonds issued and get these projects started,” Kennedy said.
The issue stems from the Legislature’s approval earlier this year of Gov. Bobby Jindal’s $325 million borrowing plan to upgrade rural roads that do not qualify for federal aid.
Jindal, who favors issuing the bonds in phases, said last week he wants to spend $150 million initially, including $100 million through bond sales.
The State Bond Commission, which Kennedy chairs, is set to meet at 10 a.m. Thursday to consider the issue.
Earlier this year, Kennedy praised the plan, in part because he said it would allow the state to take advantage of historically low interest rates to improve about 1,000 miles of rural roads.
“We will probably never see interest rates this low again in our lifetime,” he said in February.
Kennedy said Monday that, unless there is a reason not to, the state should consider selling all of the bonds.
“Interest rates are low,” he said. “I do expect them to stay low. But none of us are clairvoyant.”
He added, “It will help the economy, it will help the transportation system. But as you know, the governor controls the votes on the Bond Commission,” Kennedy said. The law does not spell out any required timetable for bond sales.
State Department of Transportation and Development officials have said they plan to use $100 million of bond issue dollars for two years and $125 million in the third year.
That money, combined with $100 million from the State Highway Improvement Fund, will mean $425 million in rural road improvements.
Asked to comment, DOTD Secretary Sherri LeBas issued a prepared statement that said the department “is working with the Bond Commission to make the best decision based upon what makes good fiscal sense, builds roads and saves taxpayer dollars.”
Kennedy also said that, despite repeated requests for information, DOTD has failed to provide a list of projects and schedule to sell the bonds.
“It was just one excuse after another,” he said. “I am in the dark.”
House Budget Committee Chairman Jim Fannin, D-Jonesboro, while generally complimentary of the program, said he is concerned that by going with a partial sale the state will not take full advantage of cheap bond rates.
He said he hopes the state can change course if it looks like borrowing costs are on the rise.
“We could come back and do more,” said Fannin, who sponsored the rural roads bill.
During the legislative debate, some politicians said project lists were tightly guarded, and spending plans spread over three years, as a way to keep lawmakers behind the plan.
Bond issues are a form of borrowing. They allow the state to raise revenue now for road improvements, then repay the money with interest.
Jindal’s plan is supposed to upgrade about 1,000 of Louisiana’s 6,000 miles of rural roads that do not qualify for federal aid.
The spending relies on the State Highway Improvement Fund. It generates about $50 million per year from commercial vehicle registration and license fees.
The initial work includes 80 projects, including three in West Baton Rouge Parish and one in Livingston Parish but none in East Baton Rouge Parish.
Every parish will benefit except for Orleans Parish.