Innovative financing of Ga. 400 express lanes helps state’s planned $1.1 billion borrowing
By David Pendered
Georgia’s routine borrowing of $1.1 billion in July is benefitting from the state’s decision to seek private-sector funding for the express lane megaproject to be built along Ga. 400, according to New York credit analysts.
By shifting future debt for the highway project to the private sector, the state has reduced credit risks on other sorts of borrowing – such as selling $1.1 billion in bonds to help pay for building schools, libraries, and locally significant projects such as the Lake Lanier Conference Center.
The method of highway funding cited by credit analysts in their rating action on the $1.1 billion bond issue is the same the state intends to follow to build express lanes along portions of I-285, north of the I-20 interchanges on each side of town. The Georgia Department of Transportation’s chief engineer, Meg Pirkle, announced the new approach at the June 16 meeting of GDOT’s board.
The connection between the express lanes and the $1.1 billion in routine borrowing begins with FitchRatings’ credit rating action on the $1.1 billion. State lawmakers and the governor approved the amount, and a project list, in this year’s legislative session.
FitchRatings issued a rating of AAA on the state’s upcoming routine bond issue. This is the highest rating in Fitch’s scale. The bonds also carry a stable outlook, meaning that analysts see no risks on the horizon that could impair Georgia’s ability to repay its lenders on notes that typically range from five years to 20 years.
In the rating action, Fitch analysts reported that the state’s credit rating is not affected by the planned $1.3 billion megaproject of express lanes to be built along a 16-mile stretch of Ga. 400. The lanes are to start at MARTA’s North Springs Station, north of the I-285 interchange, and proceed north toward Forsyth County.
Fitch’s analysts reported that the express lanes project “does not materially affect” Georgia’s long-term capacity to repay its loans. The full comment from the rating action observes:
- “The state currently estimates the SR 400 Express Lanes project will total approximately $1.3 billion. A very conservative assumption of adding this full cost to the state’s net direct debt does not materially affect Fitch’s assessment of the state’s long-term liability burden. Fitch anticipates project financing will include developer equity, federal grants and proceeds of previously issued GO debt, in addition to future state support.”
GO debt, meaning general obligation debt, is repaid by the full faith and credit of the issuer, rather than revenues collected from tolls, fees or other such sources.
Fitch’s rating action also noted existing debt carried by the State Road and Tollway Authority. SRTA is an independent state authority established by the Legislature to finance transportation projects.
SRTA is carrying about $230 million in debt related to the retrofit of the Ga. 400/I-285 interchange, according to the rating action. SRTA assumed the debt as its part of a public-private partnership. The debt is to be repaid by the state’s motor fuel tax revenues collected by the Georgia Department of Transportation and paid to the State Road and Tollway Authority, according to the rating action.
Pirkle announced the state is shifting the cost of maintenance, along with the costs of design and construction, to a private partner for the lanes to be built along I-285. All these costs, traditionally shouldered by taxpayers, are to be shifted to shareholders in GDOT’s private partners.
Pirkle said the private sector is willing to shoulder a share of costs of the future express lanes. Drivers in congested corridors, such as I-75 north of I-285, have demonstrated their willingness to pay tolls to achieve shorter trip times. The state has increased the incentive for private companies by authorizing partnerships of 50 years, rather than 35 years. Pirkle said the added time gives the private sector a cushion to recoup costs and realize revenues.
Rates on the new tollways are to be set by the private partner within boundaries determined by the state.