DALLAS — Less than two months after a record $1.5 billion deal, the Texas Transportation Commission is preparing another $1 billion issue of general obligation bonds.
The new debt, expected to go to market around Sept. 15, will include taxable Build America Bonds, but the ratio of taxable to tax-exempt has not been reported.
“That’s the target date, but it could be a little later than that,” a spokesman for the Texas Department of Transportation said. TxDOT is the state agency overseen by the Texas Transportation Commission.
The issue is the first under Texas’ Proposition 12 program approved by voters in 2007. The previous TTC issue on July 26 came under Proposition 14, which is backed by fuel taxes and registration fees in the state.
After voters authorized the program, the Legislature in June 2009 approved up to $2 billion of Proposition 12 bonds for non-toll projects and $1 billion for the state infrastructure bank. State infrastructure banks were authorized in 1995 as a part of the National Highway Designation Act to help accelerate mobility projects.
The Texas Bond Review Board in January authorized the TTC to issue the Prop. 12 bonds in fiscal 2011, which begins Sept. 1.
The highway improvement GO bonds are supported by the state’s general revenue fund, with current proceeds intended for specific capital projects. Future proceeds will support the infrastructure bank.
The bonds are rated AAA by Fitch Ratings and Standard & Poor’s, mirroring Texas’ bond rating.
“Fitch rates the state’s GO debt AAA, reflecting its low debt, conservative financial operations, and an economy that has expanded and diversified, despite recent recessionary conditions,” analysts wrote. “Financial pressures arise from the demand that rapid growth places on the state’s consumption-based tax system, as well as from longer-term transportation needs and an increased state commitment to education.”
The July issue of Prop. 14 bonds were also rated triple-A. With maturities in 2030 and coupons of 5.178%, the bonds recently carried yields of 4.448%, or 114.8 basis points over the Municipal Market Data scale. That’s down 36 basis points from the original yield.
Driven by rapid population growth, the state has developed multiple bond programs over the last decade, including the GO mobility fund bonds and state highway fund revenue bonds.
On gasoline, Texas levies a 20-cent per gallon tax on top of the 18.4-cent per gallon federal tax that has not been adjusted since 1993. Since 2002, the amount of state motor-fuel tax revenue deposited in the highway fund has been less than the amount spent to maintain the more than 193,000 lane-miles of highway.
Population growth and freight traffic projected through 2030 indicates that Texas would need to invest $315 billion over the next 20 years to keep up with demand, according to a recent report.
Though cushioned from the early effects of the 2007 recession by its energy sector, Texas is now coping with falling revenue at the state and local level.
“Recessionary weakness appears to be moderating, although the downturn has weighed on collections of sales and natural resource taxes,” Fitch observed.
In 2009, lawmakers balanced the fiscal 2010-2011 budget by lowering planned spending from the previous biennium and relying on federal stimulus funds. Following weaker-than-forecast tax collections and the comptroller’s downward revenue forecast revision in November 2009, spending was cut 5% through the fiscal 2010-2011 biennium.
When lawmakers convene in Austin next January for the 2011 session they will face a budget shortfall estimated $18 billion in the next biennium.
