Bond Issues For Privatized LSU Hospitals No Longer Tax-Exempt

Mar 21, 2013

Plans to privatize most of LSU’s public hospitals are making repairs and construction to the facilities more expensive.

The Bond Commission learned Thursday that bonds issued for such projects are no longer eligible for IRS tax-exempt status because facilities won’t be purely public.

The Commission called on a bond lawyer to explain what those in the trade call “the business-use rule.”

“The rule is, it certainly has to be owned and operated by LSU, but the fact that Children’s will be there, occupying more than ten percent of the space, they don’t have to have an ownership interest," said the bond lawyer.

Nearly $56 million in taxable borrowing was approved Thursday for LSU health care facility construction projects, done through bond sales to investors that are paid off over time.

Director of the Bond Commission Whit Kling said the repayment of those bonds will cost the state $13 million more than if the bonds were tax-exempt.

Gov. Bobby Jindal has pushed to privatize the LSU hospitals to save the state money in operating funds.