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Pennsylvania Borrowing $1.9 Billion to Fund Bridges

Pennsylvania is tapping the municipal bond market to ensure its bridges are able to withstand car traffic less than a year since a bridge in Pittsburgh collapsed, and with about 14% of the commonwealth’s bridges being classified as structurally deficient. …

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Bloomberg

Pennsylvania Borrowing $1.9 Billion to Fund Bridges

By Skylar Woodhouse
December 6, 2022

Pennsylvania is tapping the municipal bond market to ensure its bridges are able to withstand car traffic less than a year since a bridge in Pittsburgh collapsed, and with about 14% of the commonwealth’s bridges being classified as structurally deficient.

The Pennsylvania Economic Development Financing Authority is selling about $1.9 billion of bonds to help pay for a series of bridge projects, including construction and maintenance. The total cost is estimated at about $2.4 billion, bond documents show.

The sale is being completed through a public-private partnership agreement to fund a loan to Bridging Pennsylvania Developer I, LLC. Bridging Pennsylvania HoldCo LLC and S&B USA Concessions will contribute a combined amount of up to $225,251,445. The Department of Transportation will contribute as much as $90 million in mobilization payments and a $50 million milestone payment, according to bond documents.

“The Commonwealth has the third largest number of bridges in the United States, and this project is a great example of how the public and private sector can partner to deliver critical infrastructure projects,” said Julie Burger, who is involved in the sale and the managing director of public finance transportation at Wells Fargo Corporate & Investment Bank.

Earlier this year, the Fern Hollow Bridge in Pittsburgh, which was deemed in poor condition by the federal bridge inventory, collapsed, highlighting the need to repair infrastructure in the commonwealth and across the US. The importance of improving US infrastructure is one of the key items on President Biden’s agenda following such incidents as the apartment collapse in Miami last year and the increase of flooding in New York City subways.

Tight Supply

The bonds are expected to price Dec. 13, just ahead of the last Federal Reserve meeting of the year. Muni returns are down about 8% this year and on pace for their worst annual performance since 1980. States and cities have sold about $348 billion this year, down 19%, data compiled by Bloomberg show.

The deal’s timing may be advantageous given the “dearth” of supply, according to Burger. Investors appear eager for an opportunity to look at a new credit that will help fund the revitalization of critical transportation infrastructure, she said.

Dora Lee, the director of research at Belle Haven Investments, said it’s hard to predict how the sale will perform, but since it’s the last full week of trading for the year, there will be pressure to close the deal before people take off for the holidays.

The Pennsylvania Economic Development Financing Authority bond offerings are rated Baa2 by Moody’s rates the deal Baa2, two steps above junk, and Fitch Ratings has it one level lower at BBB-. Wells Fargo Securities and JP Morgan are serving as lead managers. The sale has a lower rating due to the public-private partnership and construction risks involved, according to Lee.

Moody’s has a stable outlook on the debt and expects the project will be completed even with the potential for “some moderate delays.”

Projects from the financing will include the replacement of six major bridges over a 66-month construction period.

“The country’s backlog of infrastructure projects has been known for a long time. The longer it takes for infrastructure assets to be repaired and maintain properly, the higher the costs will be,” Lee said. The fact that the commonwealth “has packaged several bridges into this deal reflects the urgent need for these repairs and the overall struggle states face to keep up with its infrastructure needs.”