Kennedy Urges Action on GO-ZONE Tax Credit Bonds
                                                                Treasurer Says State Should Act Fast to Prevent Local Government Bond Defaults

BATON ROUGE, LA – State Treasurer John Kennedy today urged the Governor and the Legislature to move forward with the issuance of the Gulf Tax Credit Bonds to prevent possible defaults by local governments on their bonded indebtedness. The Louisiana Legislature passed legislation during the February Special Session that authorizes the issuance of up to $200 million in Gulf Tax Credit Bonds with a 100 percent match by the state pursuant to the federal Gulf Opportunity Zone Act of 2005 (GOZA).

“This legislation was extremely important because these local governments have approximately $8 billion outstanding in bonded indebtedness, and only about half of that amount is insured,” said Treasurer Kennedy. “Now that the Legislature has passed the authorization for these bonds, it is crucial that this program take effect immediately. Just one default would hurt every governmental entity in Louisiana, including the state’s bond rating. With the Governor’s support, we can have a pool of up to $400 million in operation as early as June to help local governments pay their debts.”

Act 41 of the 2006 First Extraordinary Session of the Legislature gives the state the authority to issue up to $200 million in interest-free Gulf Tax Credit Bonds under the 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.

“Local governments in hurricane-impacted areas need to be able to take advantage of this program as soon as possible so they don’t get caught in a financial crisis,” said Treasurer Kennedy. “On top of trying to pay employees and keeping the lights on, many local governments are wondering how they will be able to come up with the money needed to make their debt service payments. The Federal Government has given Louisiana a solution through the Gulf Tax Credit Bonds and it is now time the state government follow through so local administrations can take action.”

Treasurer Kennedy says the state could restructure state debt and use a portion of the proceeds to come up with the required state match for Gulf Tax Credit Bonds. Alternatively, the state could use a portion of Community Development Block Grant funds to provide a match for the bonds.

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