House Committee Passes Gulf Opportunity Zone Act Provisions
Kennedy Says Gulf Tax Credit Bonds and Advance Refunding Will Help State and Local Government Finances

BATON ROUGE, LA - House Bill 93 authorizing the issuance of $200 million in Gulf Tax Credit Bonds and the restructuring of $4.5 billion in state and local government debt has passed out of the House Ways and Means Committee, according to State Treasurer John Kennedy.

“Congress passed the Gulf Opportunity Zone Act and it was signed into law this past December, but we needed the State Legislature to authorize the bonding provisions in the new law,” said Treasurer Kennedy. “This is the first step toward getting that approval. I have been encouraging the Governor to support this state legislation since the GOZA was introduced, and I am grateful that she came aboard. With her support, we could have a pool of up to $400 million in operation as early as June to help local governments pay their debts.”

HB 93, by Rep. Bryant Hammett, would give the state the authority to issue up to $200 million in interest-free Gulf Tax Credit Bonds under the Gulf Opportunity Zone Act (GOZA) to help local governments pay bonded indebtedness and avoid defaults. The state would be responsible for paying the principal on the bonds, and the U.S. government, in effect, would pay the interest by providing bond purchasers with federal income tax credits. The state would have to come up with a 100 percent match for the bonds.

“We clearly have some units of local government that are struggling,” said Treasurer Kennedy. “On top of trying to pay employees and keeping the lights on, they have to worry about making debt service payments. Now, the state will be able to help local governments with their bond payments. We are not going to have any defaults on local government debt if I have anything to do with it.”

HB 93 would also authorize the state and local governments to do a second advance refunding, or restructuring, of up to $4.5 billion in outstanding debt on a tax-exempt basis under the GOZA. This was previously prohibited under federal law.

“The benefit of this provision is the state could restructure general obligation debt, extend its maturity to eliminate debt service payments for five years, and free up $1.4 billion over five years,” said Treasurer Kennedy. “The process would be similar to what a homeowner does when he lowers his principal and interest payments by refinancing a 15-year mortgage into a 30-year mortgage.”

Treasurer Kennedy says the state could use a portion of the proceeds from an advance refunding to come up with the required state match for Gulf Tax Credit Bonds. Local governments could also take advantage of the provision to free up additional cash flow to help with rebuilding and operating costs.

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