The Maine Municipal Bond Bank later this month will issue nearly $50 million of debt backed by revenue allocated to the state's new TransCap Fund that lawmakers established to help finance transportation infrastructure needs.
Citi is the book-runner on the fixed-rate transaction and Wachovia Bank NA is co-senior manager on the deal, which is set to price Sept. 23. Hawkins, Delafield & Wood LLP is bond counsel. There is no outside financial adviser.
The TransCap Fund, a new credit for the state, has yet to receive ratings from the three credit rating agencies. Once the transaction gains its ratings, officials will have a better idea whether the bonds need enhancement. Bond bank executive director Robert Lenna said the sale may price without insurance, if the credit receives double-A credit ratings or higher.
"That's why we haven't approached the bond insurance, we haven't done anything yet," Lenna said. "If we get a double-A rating, then probably bond insurance with double-A ratings would not be an advantage. But we haven't gotten to that bridge yet, we haven't crossed it."
Current plans call for maturities of up to 15 years.
The TransCap Fund will receive an initial $5 million allocation from the state's Highway Fund by June 30, and will also gain roughly $30.6 million every year from increased motor vehicle fees and a portion of the state's gas tax receipts redirected from the Highway Fund to the TransCap Fund.
Of the approximately $30.6 million of future revenues, the fund will receive roughly $16 million annually as the state will now direct 7.5% of its total gas tax revenues to the fund. Other revenues include $10 million from a $10 increase in registration fees and $4 million from a $10 increase in title fees. The increased vanity plate fee is projected to raise another $600,000 per year, according to Lenna.
While the $5 million transfer from the Highway Fund is subject to annual appropriation by the legislature, the gas tax and vehicle fees are dedicated sources of revenue.
"Those revenues are ongoing revenues, unlike the $5 million. Where in subsequent years there may or may not be another allocation from the Highway Fund, these other numbers are in law," Lenna said.
Lawmakers approved the creation of the TransCap Fund in April to help address Maine's growing road and bridge-repair needs. The legislation enables the bond bank to issue up to $160 million over the next five years. Lenna anticipates the bond bank will sell TransCap revenue bonds every 12 to 18 months, depending on construction schedules.
The new TransCap Fund, along with grant anticipation revenue vehicle bonds securitizing future federal grants, will help Maine finance capital projects on roads and bridges.
Officials peg total transportation infrastructure needs at roughly $3 billion over the next 10 years, with the state looking to generate $200 million to $300 million annually from the bonds and Garvees to address the needs, said Karen Doyle, director of capital resource management at the Department of Transportation.
Yet this month's $50 million TransCap revenue sale and a $50 million Garvee deal that priced in late August will only generate $100 million for transportation infrastructure, one half to one third of what officials say the state needs.
"Right now that's the deficit that we're facing and so when [Gov. John Baldacci] comes out in January with the next financing plan, then we'll know, but right now revenues are declining," Doyle said. "And so we're using bonding just to try and keep things going as best we can."
