Alabama Leaders Propose Different Garvee Bond Deals

BRADENTON, Fla. — Alabama Gov. Robert Bentley is proposing to sell as much as $500 million of grant anticipation revenue vehicle bonds to finance upgrades to road and bridges in projects that his office would select after consulting with local leaders around the state.

Meanwhile, 17 state senators are sponsoring a bill unrelated to the governor’s proposal that would authorize the sale of $650 million of Garvee bonds. SB 339 would establish the Public Road and Bridge Construction Council to select projects proposed by counties.

Bentley, who first talked about transportation bonding plans late last year, said thousands of Alabama’s 59,000 miles of roads and 8,650 bridges are in desperate need of rehabilitation, while many roadways are crumbling.

“We cannot ignore the conditions of our infrastructure,” the governor said. “School buses have to be detoured from an estimated 200 bridges a day because of weight restrictions. Our people deserve better.”

Bentley said using Garvees would allow the state “to pave today’s roads with tomorrow’s federal dollars.” He also noted the state’s own limited finances, and the fact that using Garvees would not require raising any taxes. He did not mention fiscal problems in Washington or the possibility of reductions in the federal highway trust fund.

“Borrowing makes good financial sense in this case because the cost of borrowing is as low as it’s ever been, and the cost of inflation on these construction projects is significantly higher than the interest rates we’ll pay on the bonds,” Bentley said.

Jeremy King, a spokesman for Bentley, said the governor believes that he is authorized to issue Garvees without legislative approval under a constitutional amendment approved by voters in 2000.

The double-A rated Alabama Federal Aid and Highway Finance Authority refunded $91.2 million of Garvees last August. The sale refinanced most, or all of the state’s outstanding bonds secured by revenues from the Federal Aid Highway Program. The issuance occurred less than three months before Alabama’s largest local government, Jefferson County, filed the biggest municipal bankruptcy case in the country.

It is not clear yet if the bankruptcy will affect the ability of other issuers in Alabama, including the state, to market bonds.

But it has been cited by a rating agency as a potential problem for the Alabama Public School and College Authority.

The APSCA, also a state agency, plans to refund $162 million of bonds in a competitive sale Wednesday.

In rating the deal Aa1 with a stable outlook, Moody’s Investors Service said challenges facing the authority include “potential economic or other exposure to Jefferson County.”

No other details were mentioned in the Feb. 7 rating report by analyst Ted Hampton. He could not be reached for further comment by press time.

The APSCA’s financial advisor, Phil Dotts with Public FA Inc., said the state has no exposure to Jefferson County’s financial problems.

The authority’s bonds were rated AA-plus by Fitch Ratings and AA by Standard & Poor’s, both with stable outlooks. Neither agency mentioned Jefferson County in their rating reports.

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Transportation industry Alabama
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