BATON ROUGE, La. (AP) — Louisiana Citizens Property Insurance Corp.'s board has voted to borrow $100 million through bonds to cover a $70 million shortfall — in direct defiance of the Jindal administration's wishes.
In an email after Thursday's vote, The Advocate reports (http://bit.ly/Yx8ltQ ) Division of Administration spokesman Michael DiResto criticized the proposed bond issue, describing it as bad for all property owners and taxpayers.
"By increasing their debt, Citizens would impose additional fee assessments on every property owner," DiResto said. "And because of the tax credit involved, the state would be put on the hook for partially subsidizing Citizens' debt payments .," he said.
"We will closely scrutinize this issue before it goes to the Bond Commission," DiResto said.
Citizens issued $978 million in bonds in 2006 to cover its Hurricane Katrina and Rita claims. Citizens billed property insurance companies doing business in the state for the payments on those bonds. The insurers passed that cost along to policyholders across the state. But the state Legislature, at the time flush with cash, passed a law that gives property owners a tax credit on their annual income tax returns to rebate those fees.
Citizens Chief Financial Officer Steve Cottrell said Citizens can arrange its payment schedule so that the current assessment, 3.74 percent of property insurance premiums, does not increase for policyholders.
The assessment has been steadily dropping, Cottrell said. The assessment will still continue to go down with the additional borrowing, but the percentage will decrease more slowly, he said.
Right now, the average homeowner pays $54 a year to cover the bond payments, according to Citizens.
It's highly possible that the state wouldn't have to pay the entire amount of the rebates on the additional borrowing, Cottrell said, because many taxpayers fail to claim the tax credit on their income tax returns.
From 2008 to 2012, property owners paid around $471 million in Citizens assessments, according to the state Insurance Department. Policyholders have only claimed around $184 million in rebates so far.
Cottrell said Citizens had only one other financing option: passing "a regular assessment" on property insurers. The insurers also typically pass this fee along to their policyholders, and policyholders would not be able to claim a state tax credit on that fee.
Information from: The Advocate, http://theadvocate.com