BRADENTON, Fla. - Alabama Gov. Robert Bentley plans to sign a bill authorizing the use of state gasoline taxes as a backup pledge to bolster future issuances of Grant Anticipation Revenue Vehicle bonds.
The Senate passed Senate Bill 289 authorizing the gas tax pledge Feb. 20, and the House passed it Wednesday. The governor has indicated publicly that he will sign it.
A fiscal analysis accompanying the bill said the added security for federal aid highway bonds could reduce the state's interest rates on the debt. State officials did not respond to requests for comment.
The bill's sponsor, Sen. Gerald Dial, R-Lineville, told the Montgomery Advertiser that he believed the state could save as much as $30 million from lower interest rates because of the added security.
In the past, the state has only authorized a stand-alone Garvee program, meaning that bonds are secured only by a direct pledge of Federal Highway Administration reimbursements for debt service.
In recent years, Moody's Investors Service has repeatedly warned about uncertainty and liquidity risks associated with stand-alone Garvee programs due to the possibility that shorter reauthorizations of federal highway funding could disrupt funds available to pay bonds.
A large structural imbalance in the highway trust fund, which relies on Congress for general fund support, was also cited by Moody's due to federal budget pressures.
Moody's downgraded Alabama's Garvees to Aa3 from Aa2 along with other state stand-alone programs in November 2012. Another round of downgrades occurred Feb. 14, but Alabama was not among them.
In January, Standard & Poor's affirmed its AA ratings on the Alabama Federal Aid Highway Finance Authority's Garvees, and said the outlook is stable. The ratings reflect strong debt service coverage levels on existing and projected bonds, S&P said.
Alabama has $391.2 million in Garvee debt outstanding. About $600 million of additional bonds are expected to be sold this year, according to S&P.
The governor initiated the state's nearly $1 billion Garvee plan in 2012. Called the Alabama Transportation Rehabilitation and Improvement Program, or ATRIP, it is the largest statewide road and bridge improvement program ever under taken in the state.
ATRIP operates as a matching program. Cities and counties propose projects eligible for federal funding, and are required to provide a 20% funding match in order to receive 80% of the remaining funds from state-issued Garvee bonds.
