In a controversial change of plans, Gov. Bobby Jindal’s administration is doing an about-face on how to finance $325 million in rural road improvements.
Sherri LeBas, secretary for the state Department of Transportation and Development, made the announcement in an email released at about 7 p.m. Friday.
LeBas said the state now plans to sell the bonds in increments rather than all at once, which state Treasurer John Kennedy and some financial experts say is needed to take advantage of historically low interest rates.
“Because borrowing costs are higher than expected and interest rates are predicted to stay low, it does not make good fiscal sense for the state to borrow more money than is needed,” LeBas said in Friday’s prepared statement.
But Kennedy, who is chairman of the State Bond Commission, said Monday that DOTD’s latest strategy is unexpected.
“That is news to me,” Kennedy said. “They did not contact me.”
He added, “I thought we had agreed that we would sell the bonds and lock in low interest rates and then draw them down as we needed them.”
Kennedy has said that, if the state spreads the bond sales over three years and bond interest rates rise, that will mean less money for rural roads.
He said Monday that he thinks the economy will be “substantially better” in three years and that, as a result, interest rates will be higher.
In a telephone interview on Monday, LeBas said she would defer to the State Bond Commission about the future of interest rates.
In a prepared statement, Commissioner of Administration Kristy Nichols said Monday that selling all the bonds at once would require an interest payment in the current financial year and a full payment for all three years of projects in the financial year that begins on July 1.
“We’re now looking to reduce the amount of borrowing to the first-year projects and restructure the sale to save the state money,” the statement says.
State services have been hampered by disappointing revenue collections, and the state faces a shortfall of nearly $1 billion for the financial year that begins on July 1.
The rural road package stems from a bill pushed by Jindal, and approved overwhelmingly by the Legislature in 2012.
DOTD officials said initially that they planned to use $100 million of bond issue dollars for two years and $125 million in the third year.
Kennedy said in August that the state should consider selling all $325 million at once, and LeBas endorsed that approach in October.
The State Bond Commission gave preliminary approval to that approach on Oct. 18.
The money applies to roads that are ineligible for federal aid.
Louisiana has about 6,000 miles of rural roads.
About 1,100 miles of roads are set to get upgrades, and Jindal has said some have gone 30 years without repairs.
Under the latest plan, DOTD officials would oversee the sale of $100 million in bonds initially and finance improvements for about 360 miles of roadways.
The first-year work includes three projects in West Baton Rouge Parish and one in Livingston Parish.
Asked about the release of the announcement on Friday evening — the start of a three-day weekend for state employees — LeBas said “that is just the time that we were having the discussion.”
The spending relies on the State Highway Improvement Fund, which generates about $50 million per year from commercial vehicle registration and license fees.
That means the total initial spending will be $150 million, with about $70 million for projects in south Louisiana and $82 million for those in north Louisiana.