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State to study refinancing of Tacoma Narrows Bridge debt

Post by Christian Hill / The News Tribune on April 30, 2013 at 9:00 am with No Comments »
April 29, 2013 4:57 pm

The state will convene a group to study ways to refinance the debt owed on the Tacoma Narrows Bridge in an effort to hold down tolls.

However, an opinion released last year by the state treasurer’s office concluded options are limited and are either very costly or not allowed under current state law.

The transportation budget that passed out of the Legislature on Sunday included an amendment requiring the Joint Transportation Committee to “convene a work group to identify and evaluate internal refinance opportunities for the Tacoma Narrows Bridge.”

Staff members of the transportation committees, the Washington State Transportation Commission, the Office of Financial Management, the Washington State Department of Transportation and the treasurer’s office will all be involved.

The work group must deliver its report by Dec. 31.

The study was requested as tolls on the Tacoma Narrows Bridge would increase 25 cents over each of the next two summers, and future increases are likely as the annual debt payments on the eastbound span continue to increase.

As I reported extensively last year, the state financed construction of the bridge primarily using so-called “zero-coupon” bonds that enabled officials to delay making large debt payments on the bridge until the toll revenue began flowing in. The state took this route due to political resistance to tolling the bridge early.

The disadvantage is that “zeroes” typically aren’t callable, meaning there’s no ability to reduce costs by refinancing if interest rates drop before bonds mature.

Last year, then-state Sen. Derek Kilmer, D-Gig Harbor, asked the treasurer’s office for options toward refinancing the debt to spread out the debt payments in an effort to keep tolls low for as long as possible.

Ellen Evans, deputy treasurer for debt management, wrote such a restructuring would cost $250 million to $500 million in a “best case” scenario and wouldn’t be allowed without a change to state law.

Here’s her entire letter:

Rep. Jan Angel, R-Port Orchard, said she’s aware there are roadblocks to refinancing the bridge’s debt but said the review by the work group is needed to vet all possible alternatives.

“We got to get up to 30,000 feet and take a look at all of this,” she said. “I want to do that before we have a crisis.”

During the legislative session, Angel was unsuccessful in several efforts to avoid proposed and future bridge toll increases.

She proposed selling naming rights on bridges to generate revenue, capping the toll on the Tacoma Narrows Bridge, and keeping the authority to approve toll increases vested with state lawmakers.

Officials assumed increases in tolls — the financing plan anticipated $1 toll increases every three years to a maximum of $6 in 2016 — and usage from population growth would generate enough money to make the escalating debt payments.

But the annual traffic count has remained flat and revenue has only increased following a toll hike. The count has hovered around 14 million a year and is projected to end the current budget period at the lowest level since the eastbound span opened nearly six years ago.

The Washington State Transportation Commission is scheduled to adopt the new toll rates on May 20. The first 25 cent increase would take effect on July 1 followed by a second 25-cent raise on July 1, 2014.

You’re invited to follow Christian Hill on Twitter @TNTchill.

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