Financing for the $585 million project was approved in January — with work beginning soon thereafter — but bonds to pay for the project have not been issued. Metro government has run into a roadblock due to a state law that limits interest rates on municipal debt to 4 percent above the prime rate. Metro’s bond counsel, Jeff Oldham of Bass Berry & Sims, said that limit currently stands at 7.25 percent due to historically low interest rates.

That wouldn’t pose a problem if Metro was using traditional tax-exempt bonds to finance the project, but it intends to use taxable Build America Bonds for about 90 percent of the debt. The bonds could have an interest rate above the state limit, Oldham said, but they also come with a 35 percent interest subsidy from the U.S. Treasury. The bonds were created by last year’s federal economic stimulus legislation.

Oldham said Senate Bill 2975 would allow the subsidy to be factored into the interest rate calculation for purposes of determining compliance with the state’s usury law.

“It’s not clear (under current law) that you get to count that rebate from the federal government,” Oldham said.

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