ATLANTA -- Louisiana Treasurer Mary Landrieu on Thursday expressed disappointment with a long-awaited legal opinion on the state's debt limitation law issued by state Attorney General Richard leyoub.
Ieyoub's opinion, dated Sept. 15, comes 11 months after Louisiana voters passed a constitutional amendment that seemed to place strict new limits on the amount of bonds the state could sell. The amendment specified that Louisiana must, by 2004, bring its total of "net taxsupported" to an amount that could be serviced by 6% of state revenues.
Since passage of the amendment, however, a controversy has developed over exactly what debt is covered, prompting Landrieu to seek legal clarification from Ieyoub.
In particular, the treasurer has pushed to have lease revenue bonds sold by a conduit issuer -- but backed by lease payments from the state -- specifically included under the cap. In addition, she has sought to place under the limit other kinds of conduit bonds secured by an annual appropriation by the legislature.
Landrieu is also chairwoman of the state's Bond Commission, which oversees all debt issuance in Louisiana.
In his opinion, Ieyoub said he could not find a legal basis for including these categories of debt under the limit and urged the legislature to enact legislation to do so if it sees fit.
In an interview last Thursday, Landrieu said she was "disappointed" with Ieyoub's approach.
"We have worked too long in the state to adopt a debt limit and then to have it thrown wide open," she said. "What I fear is that [lack of clarification] could open the floodgates to issuance."
The treasurer said it would be "particularly unfortunate if lease transactions are seen as a loophole."
State Rep. Steve Theriot, D-Marrero, who sponsored the debt-limitation legislation, said he also sees shortcomings with the attorney general's ruling.
"Our legislative intent was very clear. What we meant to include in the debt limitation was any financing directly or indirectly supported by state appropriations," said Theriot, who is also chairman of the House of Representative's Ways and Means Committee.
The lawmaker said he was particularly concerned that a lack of clarity about what is included under the cap will antagonize potential investors in Louisiana debt.
"It would be a farce to go out into the market and have us questioned about whether we are adhering to our constitutional limit," he said.
Theriot said that the continuing ambiguity about what kinds of borrowings fall under the debt limit is also likely to encourage lawsuits if contested borrowings come to market.
But Theriot stopped short of saying he would propose new legislation to clarify the 1993 law. "If the bonds [such as state-backed lease financings] are issued, then I may act," he said.
Theriot noted that one financing that he would insist be added to the state's debt limit is any lease-backed bonds for a controversial prison for youth offenders in LaSalle and Madison counties funded by state per diem payments for inmates. In addition, he said he has been concerned that supporters of a proposed state-backed lease financing to be sold by the Louisiana Health Care Authority were seeking to evade the cap.
Rusty Jabour, Ieyoub's spokesman, defended the attorney general's opinion on Friday. Jabour noted that the lengthy deliberations of a task force assembled last fall failed to reach a consensus on whether to include the lease-purchase debt under the state bond cap.
"The attorney general was asked to interpret a law, and he did so after a thorough and exhaustive examination of the issues involved," Jabour said. "There is nothing that binds the Bond Commission to do as he says. The policy decision remain in their hands."
Jabour also noted that the Bond Commission last September enacted a set of rules that did explicitly define "net state tax-supported debt."
In addition to general obligation debt, the commission listed three other kinds of financings that count toward the cap: "debt secured by capital leases of immovable property payable by the state or annual appropriations of the state .... debt secured by statewide tax revenues or statewide special assessments," and "bonds secured by self-supported revenues which in the first instance may not be sufficient to pay debt service and will then draw on the full faith and credit of the state."
As to the conduit debt secured by lease payments from the state, Ieyoub wrote "the State, acting purely as lessee, is only obligated to pay rent to its lessor.
"The mere fact that a lessor may issue its own debt and secure that debt with the revenue stream generated by the lease of space to the state does not cause the state to be liable for the payment of debt service unless the state assumes that additional burden," he wrote.
Ieyoub agreed with the task force's conclusion that general obligation debt and revenue bonds issued by the state must be included under the cap. He also agreed with the task force that revenue bonds payable from fees, service charges, or tolls are not included under the cap.
Under the terms of the constitutional amendment passed last October, the debt limit percentage could be waived by a vote of two-thirds of elected members of both legislative chambers.
The amendment provides constitutional status to a debt limitation statute passed by the legislature earlier in 1993. But unlike the constitutional amendment, the legislation contained year-by-year issuance guidelines.
