Blanco sued over GO Zone bond program

Published 11:31 pm Monday, September 10, 2007


Associated Press Writer

BATON ROUGE (AP) — Business developers seeking to build four movie theaters in south Louisiana with dollars from a hurricane recovery business loan program have sued Gov. Kathleen Blanco, saying she is improperly meddling in the program.

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But it was unclear if the lawsuit would proceed because Blanco agreed Monday to the financing plan for the movie theaters, a move her office said wasn’t prompted by the lawsuit.

The lawsuit centered on the tax-free, low-interest Gulf Opportunity Zone Act loans available to private business ventures in 31 parishes affected by hurricanes Katrina and Rita. Dollars in the program are limited, and state officials disagree about who has the final authority over divvying the money through the GO Zone bond program.

In December, the State Bond Commission approved a request to use up to $40 million in GO Zone bonds — a cheap form of borrowing that involves selling bonds to investors to generate cash for a project — to build the theaters in Kenner, Slidell, Lafayette and New Iberia.

When Blanco hadn’t signed the GO Zone allocation letters by Aug. 31, the movie theater developers filed a lawsuit against her, challenging her authority to stop GO Zone allocation letters.

Blanco issued the allocation letters for the theaters on Monday, her spokeswoman Marie Centanni said. The governor already had planned to send out the GO Zone bond letters before her office learned of the lawsuit last week, Centanni said.

“It had nothing to do with the lawsuit. It’s just a coincidence,” she said.

A hearing on the lawsuit was scheduled Tuesday in state district court in Baton Rouge, but Centanni said lawyers with the governor’s office were working with the movie theaters’ attorneys to dismiss the lawsuit. A call to the lawyer for the theaters wasn’t returned.

The governor’s office contends that an executive order issued by Blanco gives her final authority on whether a business can receive GO Zone bonds.

The movie theater developers disagreed, saying in their lawsuit that the federal legislation only mentions the Bond Commission, not the governor’s office, for oversight of the program. Blanco’s signing of GO Zone allocation letters “is a purely ministerial duty required by law, which leaves no room for her discretion in performing this act.”

The lawsuit is filed on behalf of Delaware-based VSS-Southern Theatres LLC, its New Orleans based subsidiary Go to the Show LLC, and EPT Slidell Inc.

It asks Judge Timothy Kelley to force Blanco to sign the GO Zone allocation letter, declare that the Bond Commission has final authority over the GO Zone bond program in Louisiana and award damages to the movie theater developers.

The Bond Commission has received at least $13 billion in applications for GO Zone bonds — but the program was capped at $7.8 billion by Congress.

The program has been stalled while the Bond Commission and the governor’s office try to work out plans for how to weed through the applications. They are looking at how to best use the dollars to create jobs and help recovery efforts. The Bond Commission is expected to receive a list of recommendations from Blanco’s office on GO Zone applications next week.

State officials also have disagreed over Blanco’s role in the GO Zone program.

Treasurer John Kennedy, chairman of the Bond Commission, has sparred with Blanco administration officials who sit on the commission about the issue. Kennedy has said he believes final oversight of the program rests with the Bond Commission.

Attorney General Charles Foti’s office issued an opinion agreeing with Kennedy, saying Blanco’s executive order conflicts with the federal statute creating the GO Zone program. Because of that opinion — and because Foti has a seat on the Bond Commission — the attorney general’s office wouldn’t represent the state in the case.

“As far as we can tell, we have a conflict of interest,” said Kris Wartelle, a spokeswoman for Foti.