New York received a $1.6 billion loan from the federal government and will sell $2.4 billion in bonds to build a replacement for the Tappan Zee Bridge over the Hudson River, one of the biggest public-works projects in the U.S., Governor Andrew Cuomo said.
The loan, the most ever issued through the federal transportation-infrastructure program, may help keep tolls on the bridge from almost tripling when it opens in four years, according to Cuomo. The new $3.9 billion span is the largest project in the 63-year history of the New York State Thruway Authority, which had its credit rating cut this week.
“Because it’s a big project, we needed a big loan,” Cuomo said on public radio today when he made the announcement. “I’m going to celebrate the Tappan Zee loan and Halloween together. A lot of chocolate in the Cuomo house tonight.”
The 55-year-old Democrat has made building the span a priority, comparing it in scope to the 19th century construction of the Erie Canal. New York officials have been discussing replacing the 57-year-old bridge for 20 years, which Cuomo has cited as an example of dysfunction in Albany, the capital. It took Cuomo about a year to execute a contract, and construction started this month.
“It was an all-hands-on-deck effort,” Cuomo said today. “It showed government can work.”
The bridge, a 3-mile (5-kilometer) span that connects Rockland and Westchester counties about 20 miles north of Manhattan, was designed to last 50 years. It opened in December 1955 and carries 138,000 vehicles each day, 40 percent more than intended.
The biggest question had been how the state would fund the new Tappan Zee, which is being built under a design-build contract by a group led by Irving, Texas-based Fluor Corp. (FLR:US) The authority has already borrowed $700 million privately to cover initial construction costs.
The federal Transportation Infrastructure Finance and Innovation Act loan will pay off that debt, according to Tom Madison, the agency’s executive director. The interest rate on the 35-year Tifia loan is tied to U.S. Treasury notes and will be set when the state closes on the deal, probably the first week of December, Madison said on a call with reporters today.
This week, the authority’s credit was rating was cut one step to A by Standard & Poor’s. The rating company said replacing the Tappan Zee may overload the agency with debt. The authority already has $3.7 billion outstanding and must also maintain its 570-mile toll road, the longest in the U.S.
S&P said the agency will probably have to increase tolls across the system to maintain the debt-coverage ratio required by bond covenants, which budget documents show may be breached by 2016 even without the cost of the new span.
The authority hasn’t ruled out the possibility of raising rates throughout the Thruway to help maintain its debt ratio, Madison said. In December, the agency scrapped a plan to raise tolls on trucks by 45 percent, replacing the more than $80 million the increase would have generated with state funds pushed through the legislature by Cuomo.
Last year, Cuomo said cash tolls on the Tappan Zee may almost triple to $14 when the new bridge opens in 2017. He said today that he still isn’t sure how high tolls will go and is waiting to hear recommendations from a tolling commission he appointed.
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