LOUISVILLE, Ky. (WDRB) -- Kentucky will look at refinancing its largest chunk of debt on the downtown Louisville toll bridges, taking advantage of possible lower interest rates triggered by the COVID-19 pandemic.
At a meeting Thursday, the Kentucky Public Transportation Infrastructure Authority voted to let a consultant study refunding more than $450 million loaned in 2013 by the U.S. Department of Transportation for the Ohio River Bridges Project.
The move allows state adviser PFM Group to analyze the possibility of replacing the loan with other bonds with lower debt payments in the coming decades and more flexibility over spending toll revenue.
"We're going to want to see some meaningful savings before we recommend doing anything," said David Miller, head of PFM's national transportation finance practice. "We're not going to do this for a break-even or just to save a few hundred thousands of dollars. We're going to save millions and millions of dollars or not recommend it."
There was no discussion by the largely governor-appointed board about how the maneuver could affect toll rates or any decision to remove tolls earlier if debt is paid off sooner. Tolls on the RiverLink bridges are set to increase in July.
A new debt deal could be completed by June, according to a timeline reviewed by the board.
State advisers have contemplated a refinancing since last fall. Miller said if interest rates stabilize, rates could continue to be low into the summer.
"We think this an opportunity and we're just trying to position ourselves," he said.
Kentucky Transportation Secretary Jim Gray at the Thursday, April 2 meeting of the Kentucky Public Transportation Infrastructure Authority.
Replacing the federal loan would let the Kentucky authority change a revenue-sharing provision that requires some toll dollars to be used to pre-pay the federal loan. Miller said the board then would "have some capital for future maintenance and projects and things of that nature."
The state uses its portion of toll revenue from the RiverLink bridges to pay off the money borrowed for construction. Those payments -- totalling $1.7 billion -- are set to end by 2053.
As part of a mix of funds for the Ohio River Bridges Project, Kentucky received a $452.2 million federal loan that, with interest, will cost $877.3 million to pay back over the coming decades.
The loan is the state's most expensive debt. Thus far, Kentucky has paid down just $18 million of it.
Wall Street analysts have begun revising their financial outlooks for toll agencies in light of traffic decreases during the COVID-19 outbreak. In some cases, Miller said traffic drops have been as high as 60 percent.
In the Louisville area, RiverLink traffic was down about 49 percent as of last week, said Megan McLain, the Kentucky Transportation Cabinet's innovative finance manager.
There were 709,191 trips on the RiverLink bridges -- the downtown Kennedy and Lincoln and the upriver Lewis and Clark -- during the week of March 24-30, 2019. Last week there were 364,266, according to RiverLink data.
"That's to be expected. But there's so much uncertainty," McLain said. "We don't know how long this will last. We don't know the effects on revenue."
In part, she explained, that's because RiverLink operator Kapsch TrafficCom has closed its Louisville and Jeffersonville, Ind., customer service centers and is no longer adding late fees and other penalties to toll bills.
Fitch Ratings listed the outlook as "stable" for the Kentucky toll road debt this week and didn't change its current rating of BBB-, which is the lowest investment-grade rating.
Miller said Kentucky has 12 months of debt payments in a reserve account, "which are in place for exactly this purpose. You can draw on them."
Reach reporter Marcus Green at 502-585-0825, mgreen@wdrb.com, on Twitter or on Facebook. Copyright 2020 WDRB Media. All rights reserved.
