Massachusetts will come to market next week with a $651 million sale of accelerated bridge program bonds in two credits, one of which received an upgrade from Moody’s Investors Service.
State officials will hold a retail period Monday for $363 million of commonwealth transportation fund revenue bonds and $288 million of federal highway grant anticipation notes. The institutional sales are planned for Tuesday and Wednesday, respectively.
Bank of America Merrill Lynch is lead manager for the CTF revenue bonds, while Citi is managing the grant anticipation notes.
Proceeds will help finance the accelerated bridge program, which the state legislature authorized in 2008 to repair or replace structurally deficient bridges, one year after a transportation finance panel estimated a $15 billion funding gap over 20 years to maintain the commonwealth’s transportation infrastructure.
Essentially all gasoline tax revenue, Registry of Motor Vehicle fees and federal highway reimbursement funds are pledged to the program.
Moody’s, while assigning an Aa1 rating to the GANs, upgraded $100 million of outstanding grant anticipation notes to Aa1 from Aa2. Moody’s, in a statement late Tuesday, cited “strong coverage” provided by a subordinate lien on Massachusetts’ federal highway reimbursements and a pledge of excess CTF revenues, and the strong bondholder protections provided by a two-pronged additional bonds test.
“We’re really proud of the rating upgrade. This is really going to help our taxpayers. We feel it reflects the credit strength of the bond program and the legal provisions provided to bondholders,” said Colin MacNaught, the commonwealth’s assistant treasurer for debt management.
“The accelerated bridge program is one of the top priorities in terms of the state’s capital budget,” he said. “Reflecting that priority, we structured these bond programs with significant pledged revenues and I think you’re seeing that in the high ratings.”
Standard & Poor’s and Fitch Ratings assign AAA and AA-plus ratings, respectively, to the GANs. Moody’s and S&P each rate the CTF revenue bonds triple-A.
CTF maturities will essentially run from 2028 to 2043, although a single maturity in 2023 is a refunding opportunity of existing gas tax bonds that are outstanding. GAN maturities will run from 2016 to 2027.
“In total, we have bonds across the curve. We have one bond with relatively short maturities and one bond with relatively long maturities. But they’re two pieces of one big puzzle in terms of the bridge program funding,” said MacNaught.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC is bond counsel for the CTF bonds, while Nixon Peabody LLP is bond counsel for the GANs.
Key projects include the Kenneth Burns Memorial Bridge, which carries state Route 9 between Worcester and Shrewsbury; the Fore River Bridge, state Route 3A between Quincy and Weymouth; the Longfellow Bridge, Route 3 between Boston and Cambridge; the Whitter Bridge for Interstate 95 in Newburyport; and the I-195 Braga Bridge interchange with Route 79 in Fall River.
Massachusetts in June raised its gasoline tax by 3 cents, to 27 cents, with state officials estimating a $95 million annual revenue spike from the increase. The new law also calls for adjusting the tax yearly for inflation, beginning in January 2015.
According to Massachusetts Department of Transportation statistics, the commonwealth has fixed 107 of the 543 bridges deemed deficient as of Aug. 1, 2008. The department’s goal is to reduce that total to 450, or 8% of all Massachusetts bridges, by September 2016.
According to a report card the American Society of Civil Engineers issued in March, 11% of bridges nationwide were structurally deficient in 2012.
