To date, two projects have capitalized on Section 129 Loans.
The President George Bush Turnpike (PGBT) is a 30.5-mile circumferential toll roadway connecting various cities in the northern part of the Dallas Metroplex. It was completed in 2006 and a 9.9-mile eastern extension is currently under construction.
The Texas Turnpike Authority (now the North Texas Tollway Authority) was given responsibility for constructing the PGBT as a toll facility so that scarce state and Federal funds could be directed to other projects in the Metroplex. In order to maintain high bond ratings, the Authority requires a toll facility to generate revenues at least 1.20 times the amount of bonds outstanding. The projected $700 million cost of the PGBT precluded financing the project exclusively with revenue bonds, since tolls were not projected to generate sufficient revenue to obtain a satisfactory credit rating in bond markets.
To help bridge this financing gap, the Texas Department of Transportation provided a $135 million Section 129 loan using Surface Transportation Program (STP) funds to TTA as part of the project's plan of finance. This funding gave TTA the ability to reduce the coverage (net revenues divided by net debt service) on its combined debt, and greatly enhance the creditworthiness of TTA's $446 million in revenue bonds issued for the first four segments of the project. Furthermore, the loan enabled TTA to contribute $20 million to the project from funds that might otherwise have been required as reserves for the debt. The repayment obligation on the Section 129 loan, which began in 2005, is subordinate to the repayment of the toll revenue bond debt service and is spread over 25 years.
The Section 129 loan was disbursed in five payments of $20 million, $35 million, $20 million, $40 million, and $20 million over a four-year period. TXDOT employed partial conversion of advance construction to spread the designation of Federal obligation authority over four years rather than incurring the upfront $135 million impact to its Federal obligation authority.
Further detail on the PGBT is available as a case study.
The second span of the Blue Water Bridge crossing from Port Huron, Michigan into Canada was financed with the help of a Section 129 loan from the Michigan Department of Transportation to the state's Bridge Fund. The second span was constructed between 1995 and 1997 with financing from both revenue bonds and a Section 129 loan. The total cost was $63 million, of which $45 million was provided by the Section 129 loan. The loan agreement was signed by January 1995; the second span was opened by July 1997. Repayments began December 1998 and were completed by 2006. Interest was charged at the state's pooled investment fund rate. Repaid funds were used for other Title 23 projects.