As Redevelopment Lags, "GO Zone" Bond Program Set to Expire ~
A special tax-exempt bond financing scheme set up for the Gulf states after Hurricane Katrina will end on January 2, 2011. And it looks as if a considerable portion of the original amount authorized by Congress - $4.5 billion for Louisiana, $2.25 billion for Mississippi, and $1.125 billion for Alabama - may go unspent. Also, money originally slated to go for reconstruction of housing and neighborhood infrastructure, including some large-scale low-income housing developments, will instead be directed to the state’s largest and most powerful industries. At the beginning of the year, the New Orleans Times-Picayune reported that “GO Zone” bond authorizations earmarked for Orleans Parish were being released for use by other parishes less hard hit in the storm, and for industries other than housing (“ GO Zone bonds for Orleans Parish rebuilding now available to other parishes,” by Rebecca Mowbray). “Because of investor discomfort about the future of places such as Orleans and St. Bernard parishes, and more recently, conditions in the bond markets where interest rates on GO Zone bonds are not much different from regular taxable bonds, many of the parishes that have most needed the economic boost have had trouble cashing in the bonds,” the paper reported. “As of Dec. 31, $1.1 billion set aside for the hardest-hit parishes -- or nearly one-third of the bonding capacity for those parishes, most of it in New Orleans -- remained unused and is now available for bidding from lightly damaged parishes.” Now, a year later, the bond program is ready to expire. And if the bonds don’t sell, that redevelopment money will disappear. Louisiana Senator Mary Landrieu is pushing legislation that would extend the deadline for authorizing and selling bonds out through 2012, the Times-Picayune reports (“ Extension of Go Zone tax incentives would help low-income housing in New Orleans,” by Bruce Alpert). But an effort to extend the program failed in the Senate by three votes back in early summer. And now, with Republicans making gains in the Senate and taking control of the house, any extension of the program is in doubt. Without an extension, say New Orleans housing officials, some affordable housing projects in the city are headed for trouble, the Times-Picayune reported (“ Expiration of Gulf Opportunity Zone tax incentives may jeopardize public housing,” by Times-Picayune staff). But finding investors willing to purchase bonds for housing projects in troubled New Orleans has been tough. That may be why state officials have moved to allocate bond authority in the program to other recipients who may be less in need of it, but more able to use it to raise money — for example, oil giant Exxon-Mobil, reports Newsweek (“ No-Go Zone,” by Ariella Cohen). “Since Congress’s unanimous approval of the GO Zone Act, Louisiana officials have issued nearly $1.7 billion in tax-free bonds—about one third of the total issued—for projects that contribute to the production of oil,” the magazine reports. This month, state officials authorized another $12 million in tax-free bond authority to Exxon-Mobil for capital improvements on a Baton Rouge facility, bringing the total for that facility to $300 million. With nearly $8 billion of bond funding authorized and just $36.5 million left to be authorized, New Orleans projects account for only $90 million of the total to date.