The West Virginia Parkways Authority approved a resolution that authorizes Authority officials to start preparing for a $500 million bond sale that will help finance $2.8 billion of state turnpike-related road projects, according to the Charleston Gazette-Mail.
One of the major revenue-projection issues state officials must address in the administrative run-up to the sale is the legislative requirement that the Authority offer unlimited-use E-ZPasses priced between $8 and $25 annually, compared to its current $285-a-year unlimited pass. Passenger vehicle tolls will most likely double once the lower-priced pass becomes available.
If voters approve the Roads to Prosperity 2017 amendment to the state's constitution in October, the West Virginia Legislature will be able to issue $1.6 billion in revenue bonds to help pay for road projects.
Bonds, both revenue and general obligation, are a popular way for state and local governments to finance public works projects. The interest on municipal bonds is federal-tax free, which lowers overall borrowing costs. All state income streams are up for grabs when it comes to paying off general obligation bonds, but revenue bonds are paid by tolls, user fees or other project-related income.
Interest rates for revenue bonds can be slightly higher than those for general obligation bonds due to the risk of revenues falling short of projections, according to the Federal Highway Administration.
So popular has the use of municipal bonds as a funding mechanism become that Barclays said issues could reach $400 billion by the end of 2016. Reuters reported that the $3.7 trillion U.S. municipal market hit a six-year high last year at $423.8 billion in bond and note issuances.
Also last year, the New York City Metropolitan Transportation Authority (MTA) raised more than $1 billion in its first real estate–backed bond sale, using lease payments it receives for the 26-acre Hudson Yards property — valued between $3.2 billion and $3.7 billion — to service the debt. Hudson Yards will deliver almost $2 billion in lease and air rights payments to the MTA during the construction phase and $89 million annually after the project is finished.
Just as with municipal bonds, certain loan programs can also offer lower borrowing costs to state and local agencies as they look for ways to finance their infrastructure initiatives. Last month, Congress heard testimony as part of a potential expansion of the Transportation Infrastructure Finance and Innovation Act (TIFIA) loan program. Past recipients said TIFIA's interest rates and terms were more advantageous than those offered by traditional lenders but that lawmakers needed to make the loans more accessible and affordable.