State Should Be Cautious Entering Market with New Federal Bonding Authority Kennedy Says Bond Commission Will Carefully Regulate State and Local Bond Issues BATON ROUGE, LA – Congress has given Louisiana new bonding authority to assist local governments and businesses affected by the hurricanes, but the state should carefully regulate all new bond issues to avoid penalties and negative credit implications, according to State Treasurer John Kennedy. “The new federal law offers several financial alternatives to help local governments and businesses, but we need to be careful not to flood the market all at once,” said Treasurer Kennedy. “We cannot sell a large number of bonds in a short amount of time or we will pay high interest rate penalties and could potentially face additional credit downgrades.” The President signed the Gulf Opportunity Zone Act of 2005 into law last week, and as a result, Louisiana will be able to issue up to $200 million in Gulf Tax Credit Bonds to help local governments pay bonded indebtedness and avoid defaults. In addition, the state will be able to issue $7.9 billion in tax-exempt private activity bonds to finance private projects and help provide the capital businesses need to rebuild. The new law also enables the state and local governments to do an additional advance refunding of outstanding debt. “It is understandable that several governmental entities would want to rush to the market to take advantage of the provisions in the new law,” said Treasurer Kennedy. “But we must proceed with care. We do not want to overextend ourselves, much like an individual would if he maxed out all of his credit cards in a short period of time. We need to have a methodical, coordinated effort and a detailed plan for selling these bonds and getting the funding local governments and businesses need when they need it.” The State Bond Commission will carefully regulate any state or local bond issues over the next several months to ensure that they proceed in an orderly and pre-determined manner. In addition, the commission will develop a detailed debt issuance plan for all bond issuers in the state regarding which issuers will go to market, the amount of bonds that will be issued, and the exact timing of each bond sale. ###
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