N.Y. Thruway OKs Trust Fund Bonds

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The New York State Thruway Authority on Wednesday approved up to $525 million of new-money bonds and up to $250 million of refunding bonds secured by the state’s highway and bridge trust fund.

The authority also announced the selection of several financial advisers using a new framework designed to boost participation by minority- and women-owned firms. 

Citi will lead manage the deal, which will price next month. Samuel A. Ramirez & Co. will serve as minority- and women-owned business enterprise coordinating manager. First Southwest Co. is financial adviser and Harris Beach PLLC is bond counsel.

New York Division of Budget spokesman Erik Kriss said that the bonds would likely be issued as a combination of serial and term bonds. The structure hasn’t been determined yet, but trust fund deals typically have a maximum maturity of 20 years with level debt service, he said.

The bonds are secured by a subordinate lien, subject to appropriation, on dedicated motor vehicle and transportation-related taxes and fees. The state has $7.54 billion of thruway senior and subordinate trust fund debt outstanding. The Thruway Authority issues the bonds at the request of the Division of Budget to finance road and bridge capital projects.

Standard & Poor’s and Fitch Ratings rate the outstanding subordinate debt AA with a stable outlook. Standard & Poor’s analyst David Hitchcock cited the credit’s strong, 2.1 times historical debt-service coverage. “It’s got a very strong economic base generating these pledged taxes, and it’s got strong legal provisions,” he said.

Another strength is the diversity of the taxes, which include fuel taxes. Trust fund revenue declined in fiscal 2009 by 2% and was projected to decline by 2.9% in fiscal 2010. The fund revenues were projected to increase by 3.5% in the current fiscal year, according to Hitchcock.

“There’s been some modest decline,” he said. “Generally, things levied per gallon of tax, or for motor vehicle fees, tend to be relatively stable.”

The agency has sold $7.22 billion of new-money trust fund bonds since 2001, according to Thomson Reuters.

The Thruway Authority last issued trust fund bonds in March 2010 with a deal composed of $277 million of taxable Build America Bonds and $300.1 million of tax-exempt bonds. The tax-exempts were issued as serials with maturities from one year to 16 years. 

Bonds maturing in 2011 priced to yield 0.435% on a 3% coupon, 16.5 basis points higher than Municipal Market Data’s triple-A benchmark scale. On the long end, bonds maturing in 2026, priced to yield 3.95% on a 5% coupon, 53 basis points higher than MMD.

Also Wednesday, the Thruway Authority approved financial advisers for bond transactions. In a response to a request for proposals, the agency selected three proposals for primary financial adviser and four co-financial advisers that may be paired with the primary advisers on particular deals.

“This is a very different approach that will serve the authority well in the future,” said chief financial officer John Bryan. “In the past, the authority traditionally selected and contracted with only one firm to serve as financial adviser on authority and state-related bond deals.”

The firms were chosen using criteria that was developed by a task force on increasing participation of minority- and women-owned business enterprises on state-backed bond transactions. One of the selections for primary financial adviser is a joint venture between Public Financial Management Inc., minority-owned Butchermark Financial Advisors LLC, and an individual, Laurene Mahon.

“There was a desire in the RFP to have a diverse team of financial advisers, and that’s the way we approached it,” said PFM managing director Bob Rich. 

Public Resources Advisory Group and the authority’s current adviser, First Southwest, were also chosen as primary financial advisers. Approved as co-financial advisers were Scott Balice Strategies, Estrada Hinojosa & Co., Acacia Financial Group, and Frasca & Associates  LLC.

Partnerships may become more common, said Paul Williams Jr., executive director of the Dormitory Authority of the State of New York. State public authorities have targets for MWBE participation and joint ventures qualify to meet them, he said. Joint ventures aren’t required in RFPs, but “in a particular situation a joint venture might be the element that helps a team get over the hurdle,” he added.

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