ATLANTA -- Louisiana's Bond Commission last Thursday set the state's debt limit for fiscal 1996 at $224 million, and gave preliminary approval to a transit lease financing that is the first of its kind in the state.

The commission, which oversees all debt issuance in the state, also gave the Louisiana Public Facilities Authority preliminary approval to sell up to $25 million of debt for a new program to fund loans for college students.

"It was a busy meeting," said Rae Logan, the Bond Commission's director. "But I was particularly glad we got the debt limit issue straightened out."

The commission's action on the debt limit follows the passage of a constitutional amendment last year that specifies Louisiana must be fiscal year 2004 reduce its total of "net tax-supported debt" to an amount that can be supported by 6% of state revenues. The state's fiscal year begins July 1.

The state legislature has set a $200 million cap on yearly issuance as a guideline for achieving the debt-reduction goal. The bond commission, however, had wanted to provide a more exact yearly figure based on preestablished assumptions about the pace of annual issuance, interest rates, and revenue collections.

Logan said that the $224 million debt-cap figure calculated by the commission's staff assumes equal yearly debt issuance from fiscal 1996 through 2004. It projects an average interest rate of 6.4% for the state's upcoming 1995 general obligation bond issue and an average interest rate of 7.5% for each deal thereafter.

At its Feb. 16 meeting, Logan said, the commission plans to sell $200 million of GOs by competitive bid. The issuance is expected to add about $18 million in annual debt service beginning in fiscal 1997.

As of June 30, 1994, the total amount of net supported state debt was $3.74 billion.

In granting preliminary approval to a lease transaction of up to $17 million for the state's Regional Transit Authority, the bond commission broke new ground.

If final details of the transaction are approved, it would allow the authority to update its aging fleet of buses with the state's first "defeased cross-border lease," according to a Bond Commission staff report.

Cross-border leases have been sold since 1990 in a number of metropolitan areas, including Seattle, Los Angeles, Denver, and New York City. Developed in cooperation with the Federal Transit Administration, they permit local bonding authorities to acquire equipment while selling to foreign investors the income tax benefits of deducting depreciation on the equipment, according to an analysis from the commission.

The principal source of funding for the offering is a grant from the United States Department of Transportation, which will provide 80% of the purchase price of 73 buses funded by the lease. The transit authority will provide the remaining 20%.

According to the commission, the authority will realize net present-value savings of about $500,000 when compared with direct purchase of the equipment for cash.

The Regional Transit Authority is a political subdivision of the state covering four New-Orleans area parishes: Jefferson, Orleans, St. Bernard, and St. Tammany. The authority currently has 477 buses that have an average life of over 11 years.

The transaction would permit replacement of the older buses in the fleet, generating annual savings of $1.5 million on maintenance costs, according to the commission analysis.

The Louisiana Public Facility Authority's college loan program, which was also given preliminary approval, was made possible by a 1993 change in the federal tax laws, according to the commission. The issuance of up to $25 million through the Super TOPS student loan program will permit student loans at 1 percentage point below current rates, according to the commission.

Based on a current interest rate of 7.43% for conventional student loans under a state-authorized program in Louisiana, the interest rate for participants in the Super TOPS would be 6.43%, resulting in a savings of $900 over the life of a $15,000 loan.

The bonds are subject to the state's private-activity volume cap.

Also last week in Louisiana, state Treasurer Mary Landrieu proposed streamlining the state's retirement funds in the light of the bankruptcy of Orange County, Calif.

The plan calls for reduced overhead and more centralized management of the state's current system.

"The Orange County situation should draw your attention to what I've been saying as state treasurer for the last seven years," Landrieu said. "We need to reorganize and streamline the methods by which we manage our pension money if we are going to be ready for the next century."

Also last week, Landrieu fired her first assistant treasurer, Rodney Craig, for misrepresenting his employment credentials.

Jules Nunn, state investment officer, and a 18-year state employee, was named as Craig's successor.

Landrieu stressed that Craig's dismissal had nothing to do with any problems with state invested funds.

"My staff and I confirmed Wednesday that Mr. Craig had not completed a Charter Financial Analyst I exam despite numerous verbal assertions from Mr. Craig that he had," she said.

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