LOUISIANA JUDGE UPHOLDS STATE PLAN TO HELP SHIPYARD WIN A CONTRACT

LOUISIANA JUDGE UPHOLDS STATE PLAN TO HELP SHIPYARD WIN A CONTRACT

A state judge has approved a state plan to pledge up to $160 million to help Avondale Shipyards win a $300 million shipbuilding contract.

District Judge Frank Saia upheld the constitutionality of a new law that allows such use of state money. Mr. Saia also ruled Wednesday that the matter is not subject to the state's new debt limit.One law involved in the legal dispute lets the state use public funds for ''cooperative endeavors" if the benefits of the projects are likely to outweigh the government's financial obligations. The other law limits the amount of debt the state can incur in any one year.

Avondale is trying to land a contract with Texaco Inc. to build two double- hulled tankers, but Texaco would not pay until the ships are finished, and Avondale needs help with interim financing, according to the state.

The state Department of Economic Development filed a lawsuit to get a legal ruling on the constitutionality of the law allowing cooperative endeavors and the legality of the particular agreement with Avondale.

Under the guarantee plan, the state would be required to pay as much as $160 million if Avondale cannot repay the loans in a timely fashion.

Jobs are at stake. Avondale said if it does not get the Texaco contract, it might have to cut its work force to 1,200 from the current 6,000.

The Department of Economic Development claimed the benefits of guaranteeing the construction financing for Avondale far outweigh the risks.

Timothy Ryan, a professor of economics at the University of New Orleans, testified Wednesday in favor of the guarantee. Mr. Ryan said if Avondale had to cut its work force, Louisiana's economy will lose about $619 million a year. State and local governments would lose about $23 million in tax revenue, Mr. Ryan said.

The ripple effect of Avondale's layoffs would lead to the loss of about 11,500 jobs and would cause the state to pay $27.6 million in unemployment benefits, Mr. Ryan testified. If Avondale gets the contracts, the influx of money would have a positive economic effect of $450 million, he said.

The department argued that the law allowing the deal is constitutional in part because it is for a public purpose. And the agreement does not violate the legal limit on state debt because it is not a debt as defined by the law, the department said.