The New York State Thruway Authority, responsible for the state’s 570-mile toll road system, is expected to sell $480 million of state personal income tax revenue bonds on Tuesday.
A retail order period is currently set for Monday, but could move to Tuesday, according to Dan Weiller, director of public affairs for the Thruway Authority.
The sale was originally scheduled for this week but got moved to next week due to the timing of the release of New York’s annual information statement quarterly update, Weiller said.
The update was released on Aug. 10 and is required to be included in disclosure by state issuers when they sell bonds that are secured by state appropriations, such as personal income tax revenues.
JPMorgan is the lead underwriter on the sale.
Sidley Austin LLP is bond counsel and First Southwest Co. is financial advisor.
Proceeds will provide the authority with funds to make grants to reimburse municipalities and other project sponsors for qualifying capital expenditures for highway, bridge and multi-modal projects in furtherance of established state aid programs.
Proceeds also will fund certain Metropolitan Transportation Authority facilities.
None of the proceeds will go toward the new Tappan Zee bridge project, Weiller said.
The bonds will mature in 2013 through 2032, and will be subject to early redemption.
The Thruway Authority is one of five issuers authorized by 2001 legislation to issue bonds backed by New York’s personal income tax revenues.
The others are the Dormitory Authority of the State of New York, the Empire State Development Corp., the New York State Housing Finance Agency, and the New York State Environmental Facilities Corp.
The bonds are secured by payments from a revenue bond tax fund, in which 25% of New York’s PIT is designated to be deposited.
Though debt service is subject to annual appropriation by the state, if there are no appropriations, the receipts will continue accumulating in the fund until it reaches $6 billion, or 25% of the PIT, whichever is greater.
“The magnitude of this set-aside is significant by all measures and we believe provides a strong incentive to eliminate appropriation risk from our credit analysis,” Standard & Poor’s said in a report.
The agency has assigned a AAA with a stable outlook to the bonds, citing very strong coverage of future maximum annual debt service at 4.15 times, solid bond covenants and the historical strength of the PIT.
“In Standard & Poor’s opinion, PITs remain an important component of New York State’s revenue mix, accounting for 60% of state tax receipts in all state funds,” the report said.
Fitch Ratings assigned a AA and a positive outlook, citing the strong bond structure and the strength of New York’s PIT.
Fitch’s rating is connected to its rating on New York’s general obligation debt, which is also AA.
The GO rating is based on the state’s wealthy economy linked to financial services, moderate debt burden and well-funded pensions, and strong financial planning and reporting practices.
“The positive outlook reflects actions in recent budgets to identify sustainable solutions to budgetary challenges, a notable change from the historical tendency to rely on nonrecurring measures to address weakening in the state’s volatile revenue system during downturns,” analysts said.
Changes in the state’s GO rating could trigger a rating action on the Thruway’s PIT bonds.
The authority’s bond sale comes amid criticism of its financial practices from the state comptroller.
The toll increase would address current financial needs of the authority, which do not take into account the cost of the Tappan Zee bridge project.
DiNapoli said the authority should explore all other options to increase revenue and cut costs before going ahead with the toll hike.
“Imposing a large toll increase could have damaging effects on consumers and businesses at a time when many New Yorkers are struggling to recover from the recession,” DiNapoli said, adding that the authority has often pushed costs and difficult decisions to the future by raising tolls and borrowing.
The analysis showed that the authority has increased operating costs by 36% over the last decade, but revenues have not kept pace.
The comptroller said the Thruway Authority should consider identifying options for operational cost savings and reforming the authority’s capital planning and borrowing practices.
The Thruway Authority’s executive director, Thomas Madison, said in a statement later Wednesday that the comptroller and his audits have actually contributed to past problems at the authority by failing to report years of “fiscal gimmicks and deferred expenses.”
Madison, who began working at the authority in January, pointed to $800 million of risky financial borrowing that an independent financial review recently uncovered.
“We will continue to do everything possible to control costs, and already anticipate cutting as much as $400 million in expenses,” Madison said.
Of the toll increase, he said that the tolls for large trucks are 50% to 85% less in New York than in comparable states like New Jersey and Pennsylvania. He also said that large trucks cause more damage to roads and bridges than a passenger car.
“Heavy trucks, not passenger vehicles, should bear these added costs, so that tolls can be kept as low as possible for all motorists.”