CHICAGO — Minnesota’s Counties Transit Improvement Board last week advanced plans for a $110 million bond sale by Hennepin County that would mark the first borrowing repaid by a special quarter-cent sales tax imposed in 2008 on the five-county Twin Cities region to support transit.
Hennepin County would sell the tax-exempt general obligation bonds as soon as next month, according to Kathy Kardell, the former Minnesota debt manager who recently joined Hennepin County and is serving as liaison to the transit board.
The board last week approved various documents under which it would issue a senior sales tax note that the county would purchase with bond proceeds. The board will dole out the proceeds through grants to support various projects managed by the Metropolitan Council of the Twin Cities and regional rail authorities.
The state Legislature created the board during the 2008 session to help connect the region’s transit systems and ease congestion. Gov. Tim Pawlenty vetoed the legislation, but lawmakers overrode his action.
The tax was included in the legislation. It generated about $88.7 million last year and $83 million so far this year. The board’s work is also supported by a $20 motor vehicle sales tax. The participating counties are Anoka, Dakota, Hennepin, Ramsey, and Washington.
Officials hope to keep borrowing costs down by having top-rated Hennepin County put its general obligation pledge behind the bonds.
“It’s going to be a much better credit coming from the county than if the board were to establish a new sales tax credit supported by a tax collected in five separate counties,” Kardell said.
The county is watching the market in anticipation of selling next month, in hopes that its tax-exempt deal will stand out among the anticipated deluge of Build America Bonds.
Proceeds will finance various transit projects, with the majority going to fund the local counties’ share of the $957 million, 11-mile Central Corridor light-rail transit line that will link St. Paul and Minneapolis’ downtowns.
The project is being overseen by the Metropolitan Council and remains on track even as some officials worry over the fate of future funding for projects following the Nov. 2 election results. At the state level, Republicans took control of the Legislature, so it is unclear whether transit will receive the same level of support it has enjoyed lately.
At the federal level, the state lost a key supporter in Rep. Jim Oberstar, D-Minn. The chairman of the House Transportation and Infrastructure Committee lost his re-election bid. Republicans who took control of the House have blocked a $45 million earmark for the Central Corridor project.
About half of the Central Corridor’s cost is to be covered by the federal government, but the project does not yet have a full funding agreement in hand. Officials said they expect that agreement early next year. Preliminary construction to relocate utility lines, and other design work, is underway. The state, the transit board, and regional rail agencies are covering the remaining costs.
The top-rated Metropolitan Council has its own bond issue coming up next week. It will take competitive bids on five series of new-money bonds totaling about $145 million on Dec. 2, according to Allen Hoppe, senior manager in treasury at the council.
The deal includes a mix of tax-exempt and taxable BABs to support park projects in a seven-county area, improvements to park and ride facilities, bus purchases, and wastewater improvements.
Springsted Inc. is the financial adviser.