Oklahoma passes bill creating revolving loan fund for state capital projects

Oklahoma, which has been prevented from issuing bonds due to a delayed annual audit, could turn to a new state-financed revolving loan fund for capital projects under a bill passed by lawmakers last week.

House Bill 1002X, which heads to the governor, would be a way to self-fund capital improvements as the state has been unable to issue bonds authorized last year for certain projects without a fiscal 2022 certified annual comprehensive financial report, according to Republican State Sen. Roger Thompson, the measure’s sponsor. 

“We need one of those to present to the bond companies in order to bond and we have not been able to produce that at this particular point,” he told the legislature’s Joint Committee on Appropriations and Budget last week.

An April 27 disclosure notice posted on the Municipal Securities Rulemaking Board’s EMMA website said the primary factors contributing to the delay include staff turnover in the state’s financial reporting unit and implementation of Government Accounting Standards Board 87, which addresses financial reporting for leases.

Oklahoma, which ended fiscal 2022 on June 30 and initially expected to release an audited report in December,  is not the only municipal bond issuer with a late ACFR. In March, S&P Global Ratings placed 149 ratings on CreditWatch with negative implications in the absence of timely audits.

Thompson said the legislation would save money for the state, which is on track to spend $55 million this year for interest payments on outstanding bonds.

The bill would create an approximately $600 million Legacy Capital Financing Fund within the state treasury for the Oklahoma Capitol Improvement Authority, which would loan money to state agencies to fund projects over a 20-year term.

Oklahoma had about $1.45 billion of Capitol Improvement Authority lease revenue bonds outstanding as of Dec. 31.

The ranks of eligible muni bond underwriters in the state was thinned in May when Wells Fargo, JP Morgan Chase, and Bank of America were included on the Oklahoma Treasurer’s list of 13 financial institutions determined to be boycotting the oil and gas industry. 

A 2022 Oklahoma law prohibits state and local government contracts valued at $100,000 or more with companies that boycott.