Louisiana borrowed nearly $500 million Tuesday to refill the fund that pays for state-backed construction projects, getting the money through two general obligation bond sales.
The state sold $347 million in tax-exempt bonds and $149 million in taxable bonds to investors for upfront cash. The bids were accepted without objection by the state Bond Commission. The debt will be paid off over years, with interest.
The dollars will go into a state escrow account. That will keep money flowing for college building repairs, economic development projects, road work and local projects financed through the state construction budget.
Replenishment of the construction fund eases concerns that some projects would have to be slowed because of a cash crunch.
“We can now get some projects built,” Treasurer John Kennedy, chairman of the Bond Commission, said after the bond sales were approved.
The tax-exempt bonds were sold to J.P. Morgan Securities LLC, with an interest rate of 3.5 percent, while the taxable bonds were sold to Wells Fargo Bank with an interest rate just below 1.5 percent. The taxable bonds had a lower interest rate because the debt will be repaid more quickly, according to the state’s financial adviser.
Commissioner of Administration Kristy Nichols, the governor’s chief financial adviser, said in a statement that the borrowing will be “financing key projects and continuing to fortify our state’s infrastructure.”
The Bond Commission also agreed Tuesday to plans to borrow $225 million for a rural road improvement program, through a bond sale expected later this month.
The dollars will pay for construction on roads not eligible for federal matching money. The debt will be paid off with registration and license fees and taxes on commercial trucks and trailers.
Louisiana’s financial situation has improved from a year ago, when the state appeared to be hovering so close to its debt ceiling that it raised worries some construction projects could be threatened.
But increased revenue forecasts and low interest rates helped give the state more room to borrow. Officials refinanced state debt, taking advantage of lessened interest rates to shrink how much the state will owe each year.
Louisiana’s debt ceiling, enacted in the early 1990s, requires that the state’s annual debt-repayment requirements fall under 6 percent of the state’s yearly income from taxes, licenses and fees.
With the current borrowing plans, the state will remain close to its debt limit for years, and the slightest downturn in revenue collections could restart worries about running out of construction money.