Louisiana borrowed $187 million Tuesday to keep money flowing to state-financed construction work, with continued budget uncertainties and the recent flooding damage raising questions about which projects will proceed.
The Bond Commission, which oversees construction spending, approved the general obligation bond sale, which involves borrowing money by selling bonds to investors for upfront cash. Bank Of America Merrill Lynch was the winning bidder. The debt will be paid over 20 years with a 2.7 percent interest rate.
Without an influx of new cash, Louisiana was expected to soon start running out of money for items in the state construction budget such as building repairs, economic development projects, roadwork, park improvements and lawmakers' local projects.
The state's financial adviser, Renee Boicourt with Lamont Financial Services Corp., and Treasurer John Kennedy, chairman of the Bond Commission, were pleased with the terms of Tuesday's sale, which were better than they expected.
Kennedy had been worried new financial questions tied to the catastrophic flooding across 20 parishes earlier this month would boost the state's interest rate and make the borrowing more expensive.
"Because of the uncertainty with the flooding, housing and other losses, I really thought our rate would be higher," Kennedy said after the meeting.
The flooding aftermath, however, may change which projects are financed with the money.
Gov. John Bel Edwards' administration, which determines how quickly projects move and which ones are forwarded to the Bond Commission for lines of credit, could reshuffle its priorities to respond to the disaster, which has heavily damaged fire stations, schools and other local government buildings across south Louisiana.
New budget woes created by the flooding and Louisiana's undetermined costs of response and recovery will heap more financial question marks on a state government struggling with an array of them.
In the construction budget, Louisiana is so over-committed in projects paid with borrowing that it would take years to pay for everything with state lines of credit. Meanwhile, the state also faces stricter limits for the next few years on how much money it can borrow because of its ongoing budget problems.