Whitmer’s administration borrows another $800 million to fix roads
(The Center Square) – Gov. Gretchen Whitmer announced the Michigan Department of Transportation (MDOT) closed on an additional $800 million bond issue, the second installment in her $3.5 billion plan to rebuild highways and bridges in the state.
The second round of bonds will cover the cost of rebuilding some of Michigan’s most highly traveled freeways, including a $120 million project on I-94 in Jackson County. After the $3.5 billion bonds are sold over the next few years, they will finance or accelerate rebuilding or significant rehabilitation of 122 major highways.
“This $800 million bond issued under the Rebuilding Michigan plan will create thousands of good-paying jobs and drive our economy forward,” Whitmer said in a statement. “The Rebuilding Michigan Plan puts Michigan drivers first by building up our economy stronger for communities and small businesses and helping families stay safe on the road as they drive to work, pick their kids up from school, and run errands. Investments in infrastructure are a priority for my administration, and I am proud that we are fixing the damn roads without an increase at the gas pump.”
S&P Global Ratings assigned an AA+ long-term rating to the latest bond sales and reaffirmed its AA+ rating for the Michigan State Trunkline Fund outstanding bonds. Moody’s Investor Services noted that despite a decline in fuel taxes and registration fees attributed to the pandemic, the bonds benefit from strong coverage by constitutionally dedicated funds.
“The state has shown the ability to raise taxes and fees charged for road use in recent years, helping improve infrastructure funding capacity and offsetting stagnant motor-fuel use trends,” Moody’s said. “Available revenue provides ample debt service coverage to accommodate planned new issuance as well as revenue fluctuations driven by changing economic conditions or other trends.”
The Oakland-headquartered financial services firm Siebert Williams Shank & Co., LLC is co-managing bond sales.
“The governor’s Rebuilding Michigan plan is doing exactly as intended, capitalizing on low-interest rates to replace crumbling freeways and bridges across the state,” MDOT Director Paul Ajegba said in a statement. “The latest bond sales and favorable market reaction underscores the wisdom of the bond sales.”
In a Jan. 2020 unanimous vote, the Michigan State Transportation Commission authorized the department to issue and sell $3.5 billion in bonds backed by state trunkline revenues.
Total proceeds will be just over $1 billion from the $800 million in bonds closed today. The actual interest costs are 2.35%. The maximum annual debt service maintains 5.9 times coverage against revenues, above the four times coverage required by State Transportation Commission policy.
MDOT also refunded $68.2 million of Trunkline Bonds. This refund will yield net present value savings of $19.3 million, funneled back into the Trunkline road and bridge program.
In January 2020, Senate Majority Leader Mike Shirkey, R-Clarklake, said that Whitmer’s spending wasn’t a roads plan.
“Bonding is a financing tool, not a funding source,” Shirkey said. “Billions of dollars of debt is not a long-term plan for infrastructure; it is asset management. We were hoping for more from our governor.”
The actual cost of the $3.5 billion program is expected to be about $5 billion.
Disclaimer: This content is distributed by The Center Square
