The Pennsylvania Department of Transportation and the Pennsylvania Turnpike Commission are in disagreement over payments the turnpike makes to PennDOT under Act 44.
PennDOT believes the commission, which oversees the 535-mile turnpike, was $118 million short in its July payment.
PTC officials last week postponed a $600 million sale of taxable, senior-lien Series 2010B Build America Bonds to update bond documents to reflect the disagreement.
The commission Tuesday
Officials also attached the disclosure to bond documents for its Series 2010A refunding bonds, Series 2010B subordinate bonds, and Series 2010A subordinate motor-license fund bonds. Those bond deals priced in July.
Nick Grieshaber, the commission’s chief financial officer, said the PTC plans to price the $600 million of BABs later this week or early next week.
The proceeds will help finance capital projects on the turnpike and not finance an Act 44 payment.
Lawmakers passed Act 44 in 2007 to help the state generate more revenue for transportation infrastructure.
The commission makes quarterly payments to PennDOT, which it uses to help finance transportation needs throughout the state.
Act 44 allows the PTC to raise turnpike tolls as needed to meet quarterly payments to the department. To date, the turnpike agency has paid PennDOT $2.6 billion under the act.
According to the PTC, it is required to pay PennDOT $450 million in fiscal 2011, which began June 1.
The commission on July 29 paid PennDOT its fiscal 2011 first-quarter payment of $112.5 million.
In an Aug. 4 letter to the commission, PennDOT said it received the payment and was unaware of a reduction in PTC’s payments to PennDOT until the beginning of fiscal 2012, which begins June 1, 2011, according to the commission’s supplement bond document.
In an Aug. 16 letter, PennDOT said that the PTC owed an additional $118 million in the first-quarter payment and that its position would apply to all remaining fiscal 2011 payments, according to the supplement.
If PTC and PennDOT cannot resolve the disagreement, PennDOT may seek to have all actions requiring a vote by PTC’s board of commissioners passed by unanimous consent.
“There can be no assurance that PennDOT will not seek remedies in addition to the requirement of unanimous voting by the commissioners,” the supplement reads. “The commission is in the process of reviewing the claims set forth in the Aug. 16th letter and preparing a response letter to PennDOT.”
Further communications between the parties about the matters are anticipated, according to the supplement, but the timing of their resolution is uncertain.
Bank of America Merrill Lynch is book-runner for the Series 2010B bonds. Cozen O’Connor and the Law Offices of Denise Joy Smyler are co-bond counsel. Phoenix Capital Partners LLP and NW Financial Group LLC are co-financial advisers.
Fitch Ratings assigns its A-plus rating to the Series 2010B senior-lien bonds. Moody’s Investors Service rates the Series 2010B bonds Aa3. Standard & Poor’s rates PTC’s senior-lien credit A-plus.
Standard & Poor’s has yet to release its rating on the Series 2010B bonds, said Standard & Poor’s analyst Joe Pezzimenti. The Turnpike has $2.26 billion of senior-lien bonds outstanding.
Meanwhile, the PTC last week announced its new underwriting pool, including four regional and-or minority-owed investment firms that officials selected to serve as senior managers. The firms include Boenning & Scattergood Inc., Loop Capital Markets LLC, PNC Capital Markets LLC, and Wells Fargo Securities.
Grieshaber said the four regional/minority-owned banks may serve as book-runners on smaller PTC deals.
Other selected senior managers include: Bank of America Merrill Lynch; Barclays Capital; Citi; Goldman, Sachs & Co.; JPMorgan; Morgan Stanley; RBC Capital Markets; and Siebert Brandford Shank & Co.
