DALLAS - The Oklahoma Department of Transportation will complete the first phase of a $500 million debt program with a $100 million negotiated sale in early fall.
The Oklahoma Council of Bond Oversight approved the issue at its monthly meeting on Thursday.
The debt will be issued as grant anticipation notes, which are a type of grant anticipation revenue vehicle, or Garvee, said Mike Patterson, chief financial officer at ODOT.
"The popular name is Garvee but these are actually Gans," Patterson said. "We call them notes, but essentially they are 15-year bonds."
Patterson said ODOT hopes to bring the $100 million of Gans to market in late September or early October.
The notes are considered to be direct Garvees because the debt is supported by payments from the Federal Highway Administration to ODOT specifically for debt service rather than actual construction costs on road projects. The obligation to pay debt service from the federal contribution is unconditional and not subject to state legislative appropriation.
ODOT's Gans carry underlying ratings of Aa3 from Moody's Investors Service and A-plus from Fitch Ratings. The credit is not rated by Standard & Poor's.
The department sold $47.6 million of Gans in March 2004, $48.9 million in August 2005, and $95.7 million of Gans in March 2007.
The state is in the process of putting together the financial team for the sale, Patterson said.
"We have a request for proposals for a financial adviser that is due back to us on Monday [today]," he said. "We are putting together a draft request for underwriters right now that will hit the street in the next 10 days or so."
The 2007 Gan sale was insured by MBIA Insurance Corp., but Patterson said no decision on bond insurance for the new bonds has been made.
"The situation on bond insurance has changed since our last issue in 2007," Patterson said. "We'll certainly consider bond insurance as a way to reduce our costs, but we'll have to see if it is a viable option."
The 15-year notes are the fourth tranche from a program authorized by the Legislature in 2000 and approved by the Oklahoma Supreme Court in late 2003.
The Legislature approved the Gan program for ODOT in October 2000, but court challenges to their constitutionality kept the bonds off the market for more than three years.
The state Supreme Court ruled in December 2003 that Oklahoma could use Gans for highway construction, paving the way for the bonds to be sold.
The Transportation Commission adopted a revised $1 billion highway plan in 2004 for work in 12 designated corridors of economic importance. The state had anticipated issuing $799 million of the notes, but the new plan lowered the financing through the Gan program to approximately $500 million.
"The law that authorized the department to issue this did not include the limit of $500 million in Gans financing," he said. "That level is something the agency imposed on itself, and this sale will complete the first phase of that financing."
Patterson said it is likely a decision will be made soon on whether to issue the remaining $200 million of Gans as the department is in the process of completing its next eight-year work plan.
Proceeds from the sale will be used to complete the financing on a number of highway projects in the designated corridors, Patterson said. Most of the proceeds from last year's sale were devoted to an interstate highway project in Tulsa.