WASHINGTON - Maryland Transportation Authority officials said yesterday that they plan to bring $425 million of grant anticipation revenue vehicle bonds to market in the coming weeks now that Congress and the Bush administration are moving toward enacting legislation that will transfer $8 billion of general funds to the beleaguered federal highway trust fund.
The MdTA postponed its Garvee deal on Wednesday after news broke that the federal highway trust fund would run out of money by the end of this month. The Garvees were to be backed in part by money from the trust fund and MdTA officials feared that news of the trust fund's woes likely would create an unfriendly market for the bonds. Officials said they will bring the deal back to market as soon as possible.
Dave Fleming, chief financial officer of the Maryland Department of Transportation, said in an interview yesterday that the MdTA pulled the deal originally based on advice from the agency's financial advisers.
"They said [the trust fund news] is going to cause some uncertainty in the market," Fleming said. "They weren't sure what type of rate we would get or who would be out there to buy the bonds."
Officials decided that the project that was to be financed with the Garvees - the state's Intercounty Connector, a $2.4 billion, 18.8-mile toll-road project intended to provide an east-west traffic link between I-270 in Montgomery County and I-95 in Prince George's County - had enough cash on hand to cover costs so that they could postpone the deal, according to Fleming.
"So it was a pretty easy choice at that point to say, 'Look, let's postpone this thing, see what shakes out in the market and then we'll reevaluate,' " he said.
Garvees, which are issued by state governments to finance the construction of transportation projects and are repaid with money from the federal highway trust fund and other sources, were especially vulnerable to the federal highway trust fund's troubles. If the federal money is delayed or withheld, it could impact the states' ability to pay debt service on their bonds.
The MdTA Garvees had been given a AAA rating from Standard & Poor's ahead of the sale, in part because they were to be secured by an irrevocable pledge of state tax revenues from Maryland's transportation trust fund in addition to the federal highway trust funds. If the federal funds do not come through, the state would be obligated to provide the money from its trust fund.
"They are ultimately secured by state obligations, so that's why it has the triple-A rating," Standard & Poor's analyst Adam Torres said. "Even though the state ultimately backs it, what's practically securing the bonds is the federal funding."
Meanwhile, Maryland stripped $1.1 billion from state transportation projects because of a major slowdown in tax revenues, but officials said the cut will not affect the state DOT's $1.8 billion of bonds for transportation projects that are in the pipeline over the next six years.
Maryland's decision to cut funds from transportation projects stems from lower-than-expected income and sales, gas, vehicle titling tax collections, and vehicle registrations, officials said.
"This is a challenging economic situation," Transportation Secretary John Porcari said in a statement. "People are driving less and not buying as many cars. While this is healthy for our nation in the long run, it dramatically affects transportation revenues. Without the expected revenue, we have to defer new projects until we can afford them."
The projects that are being deferred include both new highway and transit projects that were added to the state's capital program earlier this year.
But the $1.8 billion of bonds the state plans to issue over the next six fiscal years will not be affected. MDOT has already issued $280 million of consolidated transportation bonds in August and plans to issue another $105 million in late-spring or early summer to fully use its fiscal 2009 authorization, Fleming said.