The New York State Thruway Authority authorized up to $1 billion of bonds secured by the state’s second general resolution dedicated highway and bridge trust fund at its monthly board meeting yesterday.
The deal consists of up to $600 million of new money and up to $400 million of refunding. It is expected to price next month. Some or all of the issue may sold as taxable Build America Bonds, chief financial officer John Bryan said at the board meeting.
RBC Capital Markets will lead manage the sale. First Southwest Co. is financial adviser and Hawkins Delafield & Wood LLP is bond counsel.
The authority sells trust fund bonds to finance bridge and roadwork in the state’s capital program. The fund receives revenue from dedicated fuel and motor vehicle taxes and fees. Those funds pay for operating and capital costs for the state’s Department of Transportation and Department of Motor Vehicles, as well as debt service on transportation-related bonds.
The fund operates with a deficit that the state closed with transfers from its general fund, including $359.8 million in the current fiscal year. The Division of Budget projects the fund will have a $695 million deficit in fiscal 2011, rising to $785 million in fiscal 2012, according to Gov. David Paterson’s executive budget released on Tuesday. The gap led Paterson to reject a $25.8 billion, five-year bridge and highway capital plan and propose a two-year plan instead as part of his budget.
Tax and fee revenue is projected to increase slightly, to $1.9 billion in fiscal 2011 from an estimated $1.85 billion in the current fiscal year. The fund’s debt-service appropriation, however, would increase to $920.2 million in fiscal 2011, a $305 million or 50% increase over the current fiscal year, according to the proposed budget. Paterson attributed the state’s overall rise in debt-service costs in part to the refinancing of bridge and highway trust fund debt in 2005.
Though the debt is backed by appropriation, the state cannot use trust fund revenues for other purposes until debt service is covered. As an additional layer of security, the bonds are backed by certain sales taxes if debt service is not appropriated.
Standard & Poor’s rates outstanding second resolution bridge and highway trust fund debt AA with a stable outlook. Fitch Ratings assigns a AA-minus with a stable outlook to outstanding trust fund bonds. Moody’s Investors Service does not rate recent New York State appropriation debt.