WPCNR QUILL & EYESHADE. By John F. Bailey. February 28, 2012:
I have been fitting my mind around the stratospheric numbers involved in financing the new Tappan Zee Bridge.
Under the current plan for paying for the bridge, the cost of handling the debt service on $6 Billion to build the Governor Andrew Cuomo Bridge would raise the new Tappan Zee Bridge toll to $11.50, and that is conservative.
WPNCR using standard municipal loan projects provided by the Municipal Capital Markets Group, notes that to handle the debt service on $6 Billion of loans at 3.11% (this week’s current bargain rate from TIVIA), the New York State Thruway Authority would have to pay $196 Million in debt service a year for 35 years in a combination of public and private financing, beginning in 2022, or earlier.
To handle this load through tolls as the governor suggests, at a minimum demands an increase to $11.50 a trip on the New Tappan Zee by 2022, the year the TIFIA (Transportation Infrastructure Finance and Innovation Act) loan for $2 Billion would start having to be repaid, if the most favorable terms are granted New York State.
If financing through other sources at the same interest rates could be arranged with payback starting in 2022 in the TIFIA loan, or earlier the bulk of the financing would have to start being paid earlier.
Here is what the initial cost of the bridge will roughly be if the state borrows $6 Billion. There is also the possibility of borrowing from state pension funds, another option put out by the governor. These figures are derived from the Municipal Capital Markets Group Municipal Bond Issue Calculator
Funds Needed: $6 Billion
Term: 35 Years (payback in a TIFIA loan begins in 2022)
Interest: 3.11 % (current TIFIA rate)
Net Monthly Payment (beginning in 2022): $16.3 Million
Annual Payment over 35 years: $195,657,912
The Thruway Authority in their Letter of Interest to apply for a TIFIA, said the state would need $1.5 Billion over the next decade to keep the old Tappan Zee Bridge active ($150 Million a year). That would add 65 Cents per trip to the present Tappan Zee Bridge toll.
The Letter of Interest did not say what the regular maintenance costs of the bridge are, so lets raise the toll $1 to $6 for the 50 million trips across the bridge a year (45 million trips were made in 2010).
Beginning in 2022, the state will have to begin paying back the $6 Billion in loans, unless of course the non-TIFIA financing from private sources ($4 Billion) has to begin to be paid back earlier by the state. To simplify matters, let us assume the governor can extract favorable terms that dovetail the start-pay dates to 2022.
The thruway has to generate $195,657,912 in annual debt service beginning in 2022, or earlier, plus costs of maintaining the new bridge, whatever that may be , let’s say $150 Million, keeping expenses of maintenance the same (assuming they will go up due to inflation). The toll would have to go up 130%
The $5 toll would have to more than double to cover the cost of the debt service $5 to $11.50 one way.
Now bear in mind, the $6 Billion cost is estimated right now. The designated qualified contractors may come in higher.
Either way from a rough numbers standpoint, I would guess that the New Tappan Zee will be the most expensive toll in the metropolitan area if not the country, rivaling the Chesapeake Bay Bridge tunnel – five years from now – if it is finished.
Last week, Governor Cuomo told his cabinet the bridge will be paid for by a $2 Billion in TIFIA funds and $4 Billion in toll-financed loans. It was the first time the state had indicated that the $2 Billion and change money promised from Washington last fall was a loan, not a grant.
Other matters that need to be clarified very quickly and should be considered by any thinking transit executive are whether the state should use the opportunity to raise tolls to inflate the bridge cash flow now to ease commuters into the new bridge toll shock. They could raise the toll in increments to provide for the new bridge future. They could decide to raise tolls to
1.) Pay for the increased maintenance of the old TZB while NTZB is built.
2.) To build a fund for the “down-the-road” mass transit option—bus rapid transit or rail—to add the mass transit piece to the new bridge as quickly as possible, shortly after it is scheduled to open in 2017.
3.) Build additional operating funds to pay down loans faster, hold tolls steady after the new bridge opens.
4.) Provide excess cash for unforeseen cost overruns. (an intriguing way the state could come up with found- money.)
5.)The MTA could grab a share of the tolls for its expansion of bus and rail that the Governor promises will be added to the new bridge.
6.) Generate intriguing money for the always beleaugured state general fund to get the state over cost crunches. All they have to do is legislate it.