Sept. 7 (Bloomberg) -- New York Governor Andrew Cuomo is asking for a federal loan of as much as $2.9 billion to build a new Tappan Zee Bridge across the Hudson River.
That adds about $900 million to a similar request made last year that wasn’t approved, according to the loan application. New York was able to increase the amount under new rules set by a transportation bill Congress approved in June that allows applicants to ask for as much as 49 percent of a project’s cost, rather than one-third. The state also plans to issue from $2.3 billion to $2.7 billion in bonds backed by bridge tolls.
The $2.9 billion loan total is the high end of the request, using a $5.9 billion cost estimate. The final cost will be determined in October, when a winning construction bid is selected, according to the application, which is dated Sept. 5. The request may drop to $2.4 billion, the state said.
“Given the importance of the bridge to the economy of the region, we are asking for the maximum we can possibly receive with the hope that we will get the most support possible,” Tom Madison, executive director of the New York Thruway Authority, said in a statement. The authority is building the bridge, which is part of the Thruway system.
Regardless of the size of the loan, “we remain confident that the financial plan for the project will ensure that the new bridge is completed in a timely manner and without creating an excessive burden on toll payers,” Madison said.
The transportation bill allows the Federal Highway Administration to issue $17 billion in loans.
Getting the loan would be a victory for Cuomo, a 54-year-old Democrat who has made building a new 3.1-mile (5-kilometer) Tappan Zee a priority. A Transportation Infrastructure Finance and Innovation Act loan would reduce the amount of toll-backed bonds the Thruway Authority would have to issue. Standard & Poor’s and Moody’s Investors Service lowered the authority’s credit outlook to negative in June.
Cuomo has said construction will be paid for mostly by toll-backed bonds, though he’s asked the Thruway Authority to to find other funding sources in an effort to prevent cash tolls from almost tripling to $14 from $5. The toll estimate was based on the bridge costing $5.2 billion. The three bids on the project are lower than that, said Brian Conybeare, a special adviser to Cuomo.
The state wants to structure the loan so that bondholders would have priority for repayment in a default.
“It’s a $3 billion security blanket for their bondholders,” said Steve Steckler, chairman of Infrastructure Management Group Inc. The Bethesda, Maryland-based firm advises the U.S. Transportation Department, he said.
The 56-year-old Tappan Zee, about 20 miles north of Manhattan, carries 138,000 vehicles each day between Westchester and Rockland counties, 40 percent more than its design intended. It’s among 14 projects President Barack Obama is speeding through the federal approval process.
Before the new transportation bill, the federal government considered project innovation and importance to regional transportation needs when granting loans, said Joung Lee, the associate director of finance and business development at the American Association of State Highway and Transportation Officials. The Washington-based association serves as a liaison between state transportation departments and the federal government.
“It’s now based on creditworthiness,” he said. “It would make it challenging if your credit profile gets too risky compared to other applications received, of which it sounds like there’ll be a good number.”
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