Tools & Programs:
Federal Debt Financing Tools
Grant Anticipation Revenue Vehicles (GARVEEs)
The following is a brief summary of GARVEE transactions in 2012.
- Three GARVEE transactions in the State of Mississippi took place to refund the remaining balances on prior issuances. A 2005 issuance for highway projects in the Harrison County was refunded with $64.13 million in GARVEEs, a 2005 issuance for highway projects in the City of Laurel was refunded with $20.82 million in GARVEEs, and a 2006 issuance for highway projects in Madison County was refunded with $88.87 million in GARVEEs.
- The Commonwealth of Kentucky issued $212.55 million in GARVEEs for the design, development, and construction of the new Ohio River Bridges Downtown Crossing, a new northbound crossing of I-65 over the Ohio River between Louisville, Kentucky and Southern Indiana, currently under development as a design-build project with traditional and toll financing.
- Washington State issued its second-ever set of GARVEEs to continue funding the SR 520 Floating Bridge project in the Seattle region. The issuance of $285.92 million follows May 2012's offering of $500.4 million to help finance the $2.7 billion project that is replacing the existing floating bridge across Lake Washington connecting Seattle with Bellevue and Redmond. As with the previous GARVEE issuance, the bonds are "Triple Pledge Bonds," which are general obligation bonds backed first by toll revenue from the existing floating bridge, second by motor fuel taxes, and third by general state revenues.
- The State of Arkansas issued $177.47 million in GARVEEs, the second of three series approved by voters in 2011 that total $575 million. As with the first series issued in September 2012, the bonds are backed by federal highway funds and a portion of the state excise tax on diesel fuel. They were issued as General Obligation bonds and are further backed by the full faith and credit of the state. The proceeds help to finance state highway rehabilitation and upgrade projects in conjunction with the Connecting Arkansas Program approved by voters in 2012 that dedicates a 0.5 percentage point increase in the state sales tax over 10 years to state, county, and city highway projects.
The following is a brief summary of GARVEE transactions in 2012.
- NC DOT issued $179.54 million on January 26, 2012 to fund 49 projects.
- On March 1, 2012 the Commonwealth of Virginia Transportation Board issued $297.59 million in GARVEE debt in its 2012A series. All of the proceeds from this GARVEE issue will be used to pay costs included by the Commonwealth for the Downtown Tunnel/Midtown Tunnel/Martin Luther King Freeway Extension Project. Virginia state law does not allow the aggregate principal amount of outstanding GARVEE debt to exceed $1.2 billion.
- The State of New Hampshire issued its second round of GARVEE bonds in support of the I-93 Reconstruction project. The $98.25 million in bond proceeds are expected to pay for mainline and interchange reconstruction and capacity improvements along the southern extent of the project. This GARVEE sale brings the total amount issued for the I-93 project to $178.25 million out of an authorized $195 million.
- Washington State issued its first ever GARVEE bonds in support of the SR 520 Floating Bridge and Eastside Project. The $500.4 million in GARVEEs is part of $1.95 billion in debt authorized to support the SR 520 Bridge Replacement and HOV Program. This major project consists of the construction of a new pontoon facility and pontoon construction, the Eastside Project to improve SR 520 and complete the HOV system east of Lake Washington, and the replacement of the existing Evergreen Point Floating Bridge across Lake Washington, incorporating the new pontoons and including connection to a future Westside approach and connection to the Eastside project. The authorized debt may be issued as "Triple Pledge Bonds," which are general obligation bonds backed first by toll revenue from the existing floating bridge, second by motor fuel taxes, and third by general state revenues. Bonds backed solely by toll revenues are also permitted. To date in addition to these GARVEEs, the state has issued $519 million in Triple Pledge Bonds. It intends to issue an additional $300 million in GARVEEs in Fiscal Year 2013 and the remaining debt as toll revenue bonds in Fiscal Year 2014.
- The State of Montana issued $50.92 million in GARVEEs to refund a portion of the outstanding principal from its 2005 and 2008 GARVEE Bond series to a lower interest rate. The Refunded Notes cover the repayment of the Series 2005 issue from 2016 through 2020. The recent bond refunding will save over $2.7 million (net present value) over the next 8 years, an average saving of $341,000 per year. Montana’s earlier GARVEE issues supported construction of various improvements to a 44.8 mile stretch of US 93 from Missoula to Polson.
- In July the Commonwealth of Virginia issued $120.625 million in its 2012B GARVEE series to raise funding for the I-95 HOV/HOT Lanes Project and the Downtown Tunnel/Midtown Tunnel/Martin Luther King Freeway Extension Project. The bonds will paid off over a 15 year period expiring in September 2027. In the event that either of these P3 projects is delayed, altered or terminated, VDOT will substitute an eligible project or projects in accordance with a Memorandum of Agreement executed with FHWA and the Commonwealth Transportation Board in December 2011.
- In September the State of Arkansas issued $197 million in GARVEEs to support its
Interstate Rehabilitation Project that will maintain, repair, and upgrade
critical segments of the state’s interstates. The bonds are to be repaid with
federal interstate maintenance funds and a portion of the state tax on diesel
fuel. They were issued as General Obligation (GO) bonds and thus further backed
by the full faith and credit of the state. By state law, GO bonds require voter
approval, which was secured at a special election held in November 2011. This
issuance is the first of a total $575 million authorized by voters.
- Also this month, the District of Columbia issued $43 million in GARVEEs to support the second phase of its Eleventh Street Bridge project. Early in 2011, it had issued $83 million to support Phase I. Phase II is improving connections between the new bridges and the adjacent freeway and roadway.
- In October, Mississippi issued $163 million in GARVEEs for various road and bridge improvements.
- In November, Ohio issued $184 million in GARVEEs to support immediate project needs on its current State Transportation Improvement Program.
- The State of Alabama issued $328 million in GARVEEs in support of the Alabama Transportation Rehabilitation and Improvement Program, which has set up a competitive process for local governments to fund their projects with state-issued GARVEEs provided they contribute a 20 percent match. This is the first of three planned issuances in support of this $1 billion program championed by the governor.
The following is a brief summary of GARVEE transactions in 2011.
- Arizona sold $158.6 million of GARVEE bonds in January 2011 to fund certain controlled access, U.S. highway, and State routes across the state.
- The District of Columbia issued $82.6 million of GARVEE bonds in February 2011 to fund a portion of $300 million Eleventh Street Bridge Replacement Project over the Anacostia River. The project will replace the twin structures, improve the interchanges at both ends of the bridges, improve regional as well as local traffic flow and local access to and from connecting freeways; increase vehicular, pedestrian and bicycle safety; and provide an alternative evacuation route and a better link to neighborhoods across the Anacostia River.
- The District is using a variation of tapered match in conjunction with the GARVEE issue. District expenditures of $63.6 million prior to the bond issuance will be used as a credit for the local share of debt service. In this manner, only future Federal-aid revenues will be used to repay the cost of debt service for the bond - an estimated $110 million over 15 years. Typically, federally-authorized GARVEE projects require the State to match the Federal share on a payment-by-payment basis. However, GARVEE bond guidance does allow a State to satisfy its match requirements with in-kind contributions such as donated property or toll credits. As such, the District Department of Transportation proposed that FHWA allow the District's previous Eleventh Street Bridge local dollar expenditures to meet the non-Federal share requirement of the GARVEE bond debt service.
- Mississippi refinanced $17.2 million in GARVEE bonds in March.
- Idaho made its sixth sale ($72.9 million) since May 2006 in support of its GARVEE Transportation Program to fund six critical transportation corridors throughout the state: US-95 Garwood to Sagle, US-95 Worley to Setters, SH-16, I-84 to South Emmett, I-84 Caldwell to Meridian, I-84 Orchard to Isaacs Canyon, and US-30 McCammon to Lava Hot Springs. In November 2005, the Idaho Transportation Board recommended $998 million in GARVEE bonds to be brought to the Idaho Legislature. Funding authorizations are requested annually. The total GARVEE bonds sold to date amount to $697 million.
- Alabama refunded its Series 2002 bonds originally used to pay for a county road
and bridge program. A remaining principal of $96,755,000 existed from the
original $200 million in bonds. The new issue of $91,195,000 will be repaid
within the same 2017 timeframe and save the state over $3.1 million in interest.
- North Carolina sold $145.5 million in GARVEEs as interim financing for the construction of the 19.7-mile Monroe Connector Bypass, the state's second toll road. Rather than issue debt backed by unknown toll receipts, the GARVEEs are being used until the road's expected opening in 2017, when they will be taken out with long-term toll backed bonds. This financing arrangement is believed to be the first of its kind and is expected to save the state more than $600 million over the life of the toll road, compared to greenfield, toll-backed financing.
- NC DOT issued $145.535 million on December 28, 2011.
The following is a brief summary of GARVEE transactions in 2010.
- Idaho made its fourth and fifth sales ($12.5 million and $71.8 million) since May 2006 in support of its GARVEE Transportation Program to fund six critical transportation corridors throughout the state: US-95 Garwood to Sagle, US-95 Worley to Setters, SH-16, I-84 to South Emmett, I-84 Caldwell to Meridian, I-84 Orchard to Isaacs Canyon, and US-30 McCammon to Lava Hot Springs. In November 2005, the Idaho Transportation Board recommended $998 million in GARVEE bonds to be brought to the Idaho Legislature. Funding authorizations are requested annually. The total GARVEE bonds sold to date amount to $624 million.
- The 2009 Kentucky General Assembly authorized the sale of $231 million of GARVEE bonds in support of the Louisville-Southern Indiana Ohio River Bridges project that provide two new bridges over the Ohio River connecting Louisville to Southern Indiana as well as major approach road and interchange reconstruction. Kentucky's Governor authorized an initial sale of $100 million in December 2009 for right-of-way acquisition, utility relocation, and environmental mitigation. In February 2010, $89.7 million of bonds were sold by the Kentucky Asset Liability Commission.
- The Mississippi Development Bank issued $161.1 million of GARVEEs on behalf the Mississippi Department of Transportation to fund highway projects in Desoto County, continuing a series of county-specific issuances in 2005, 2006, 2007, and 2009.
- Ohio's first of two issuances in 2010 and 12th since 1998 totaled $215 million to support a series of highway and bridge projects across the state. Of that amount $98 million were taxable Build America Bonds and $117 million were tax-exempt fixed-rate bonds.
- Delaware issued its first GARVEE bonds in May 2010 to complete the final design and right-of-way acquisition for the new U.S. Route 301 from the Maryland State Line to SR-1 in New Castle County near Middleton. The project also includes a Spur Road from U.S. 301 north to the Summit Bridge at SR-836. The full funding package for construction of the project has yet to be developed, but the Delaware Department of Transportation plans to rely heavily on issuing bonds backed by toll revenues generated on the new facility. In total, $113.5 million in GARVEE bonds were sold.
- Mississippi's second round of GARVEE issuances in 2010 occurred in June with a $50 million short-term offer to fund various highway projects.
- The State of New Hampshire issued its first GARVEE bonds in early November to help fund the expansion and modernization of a 19.8-mile segment of I-93 north from the Massachusetts State Line to the I-293 Interchange in Manchester. New Hampshire's $80 million transaction was issued in two tranches. The $20 million in Series A bonds were issued as taxable Build America Bonds, which receive a subsidy payment from the U.S. Treasury equal to 35% of the taxable interest paid by the state. The Series B Bonds were issued in hybrid form as "Recovery Zone Economic Development Bonds" under the American Recovery and Reinvestment Act of 2009 and will receive payments from the Treasury equal to 45% of the taxable interest paid. See IPD's Newsworthy feature on the issue.
- Maine's third GARVEE sale took place in November 2010 in the amount of $50 million in Taxable Build America Bonds issued by the Maine Municipal Bond Bank. A portion of the proceeds is being used to partially fund the construction of the replacement of the Veterans Memorial Bridge over the Fore River between the Cities of Portland and South Portland. The bridge is nearing 60 years of age and is designed to be a gateway to Maine's largest city.
- Ohio's second issuance in 2010 totaling $230 million is being used to support 20 construction projects across 11 counties.
The following is a brief summary of GARVEE transactions in 2009.
- Idaho made its third sale since May 2006 in support of its GARVEE Transportation Program to fund six critical transportation corridors throughout the state: US-95 Garwood to Sagle, US-95 Worley to Setters, SH-16, I-84 to South Emmett, I-84 Caldwell to Meridian, I-84 Orchard to Isaacs Canyon, and US-30 McCammon to Lava Hot Springs. In November 2005, the Idaho Transportation Board recommended $998 million in GARVEE bonds to be brought to the Idaho Legislature. Funding authorizations are requested annually. A total of $172.2 million in bonds were sold in January 2009, bringing the total to date to $540 million.
- The State of Georgia continued to use GARVEEs to help fund its $15.6 billion Fast Forward Program, which is accelerating 18 years worth of transportation improvements down to six years. Congestion relief projects include ITS applications, ramp metering, signal timing upgrades, HOV lanes, new bus rapid transit, and 400 lane-miles of new interstate capacity. Its third sale in the past four years amounted to $480 million.
- Rhode Island made its third sale (since 2003) of GARVEE bonds in March 2009 in the amount of $169 million for certain highway, rail and bridge improvements, including the Route 195 Relocation (Iway), Washington Bridge, Sakonnet River Bridge, Freight Rail Infrastructure Project and Route 403 Project. Rhode Island issues its GARVEE bonds through the Rhode Island Economic Development Corporation.
- West Virginia continued to fund improvements to Route 35 through GARVEE bond sales, completing its third sale in March 2009 in the amount of $77 million. The project is widening this important route from Charleston on to major Ohio cities including Cincinnati, Dayton, and Columbus.
- Arizona sold $55.4 million of GARVEE bonds in April 2009 to continue to fund certain controlled access highway projects in Maricopa County.
North Carolina authorized the sale of up to $900 million in GARVEE bonds in 2005 (House Bill 254). Its second issue of $243 million in July 2009 (following $288 million in October 2007) is being used to continue to support various roadway improvements throughout the state to increase safety, preserve and improve interstate routes, and enhance North Carolina's strategic highway corridors. Additional issuances are planned for 2011 and 2013.
Unlike most states, North Carolina designed its GARVEE program with an "evergreen" structure that allows it to issue additional bonds over time, subject to certain legislative requirements. Highlights of North Carolina's GARVEE legislation include the establishment of conservative annual debt service relative to anticipated Federal revenue, geographic distribution of the bond proceeds to finance improvements to the Federal highway system, flexibility in project selection, and most importantly, legislative authority for continuing use of the bonds.
NCDOT estimates that 29 strategic projects were accelerated at an average time savings of 3.4 years with an estimated cost savings after debt service of $135 million through the initial October 2007 GARVEE bond issuance. The agency also estimates that $509 million will be saved through the GARVEE projects included in its 2009-2015 STIP.
- The Mississippi Development Bank issued $72.8 million of GARVEEs on behalf the Mississippi Department of Transportation to fund highway projects in Harrison County, continuing a series of county-specific issuances in 2005, 2006, and 2007.