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ITD and IHFA refinance part of state’s GARVEE debt, saving $12.7 million

Idaho’s roads and bridges got extra help in June when a portion of Idaho’s outstanding GARVEE debt was refinanced, saving the state $12.7 million over the next decade.

“This is an additional $12.7 million that can be put toward restoring and preserving the state’s transportation network of highways and bridges,” said Idaho Transportation Department (ITD) Director Brian Ness. The Idaho Legislature also allocated additional funding of $94 million this year to help stem the state’s $262 million annual shortfall for road and bridge maintenance and repair.

GARVEE bonds are the grant anticipation revenue bonds to generate cash flow in anticipation of receiving future federal funds. The funds were used statewide to improve Idaho’s highways, from U.S. 95 in northern Idaho, to Interstate 84 improvements and the Idaho 16 extension in the Treasure Valley, to U.S. 30 in eastern Idaho. The projects financed with the original bonds have either been completed or are nearing completion.

“Rather than having to wait decades for these improvements, Idaho drivers are enjoying the benefits right now, thanks to this financing strategy,” explained Idaho Transportation Board Chairman Jerry Whitehead. “Bonding our needed road and bridge projects allowed the department to proceed with construction and take advantage of a lower cost of materials. It also greatly improved the safety of these corridors.“

ITD, in consultation with Citigroup and the Idaho Housing and Finance Association (IHFA) determined the best timing to refinance all Series 2006 callable bonds, totaling $97.7 million, and a portion of the Series 2008 callable bonds, totaling $84.5 million. IHFA handled the initial GARVEE bonding for ITD in the amount of $806.8 million.

“As issuer, IHFA is always on the lookout for ways to save ITD and Idaho money on its bonds, and $12.7 million dollars is a sizable savings for Idaho and ITD.” said John Sager, executive vice president and chief financial officer of IHFA.

Beginning in 2016, Idaho should see an annual savings of approximately $1.4 million per year for the next 10 and one-half years, because of refinancing. An interest rate of 2.92 percent was achieved without extending the time period to pay off the debt. The previous interest rates were 4.57 percent for the 2006 series and 4.73 percent for the 2008 series.

The Idaho Transportation Board authorized the transaction during its March 2015 meeting.