Case Studies

  • South Carolina Transportation Infrastructure Bank

    PFM was retained as Financial Advisor to the South Carolina Transportation Infrastructure Bank (“SCTIB” or “Bank”) over thirteen years ago to assist in the development of its financial plans, and remains the only advisor the SCTIB has ever had. PFM is the lead advisor to SCTIB. The firm made recommendations as to SCTIB structure alternatives, and ultimately wrote the financial business plan that is allowing funding of critical transportation projects totaling over $3 billion.  Because of the financial pressures created by vast transportation infrastructure needs in this rapidly growing state, many of these projects would have been unfunded for years without the SCTIB.  SCTIB operates as a leveraged revolving loan fund but also effectively as the South Carolina Department of Transportation’s transportation revenue and GARVEE bonding program.

    SIB Program Establishment.  PFM helped SCTIB to establish the initial structure and funding, financial model, pool loan requirements, credit criteria, long-term business plan, and subsequent leveraging through its bond program.  PFM worked on the legislation that created the initial funding sources for the program.  The SCTIB may issue revenue bonds to raise proceeds necessary to provide loans and other financial assistance.  The SCTIB Board may request up to an amount equal to one cent of state gas tax annually appropriated to the SCDOT for the construction and maintenance of State highways (the “Highway Funds”).  The SCTIB also receives Truck Registration Fees and a portion of the Motor Vehicle Registration Fees collected pursuant to the SC Code of Laws.  The SCTIB’s legislation (Act 148) provides that any loan repayments received by the SCTIB are revenues of the SCTIB and may be used to secure bonded indebtedness.  One of the most innovative features of the SCTIB is the pledge of over $60 million per year of long-term loan repayments from various projects to secure its Revenue Bonds

    Long-Term Financial Planning.  PFM created the first SCTIB business plan that outlined the types of financial assistance considered, a leveraged revolving loan financial structure for the SCTIB, credit rating issues related to financial assistance, suggested project credit criteria, and the suggested administration for the program.  From this business plan, PFM developed a capital planning model to optimize the timing of bond issues as well as the mixture of pay-go funding, revenue bonds and general obligation bonds given the unique cash flow constraints and project draw requirements of the SCTIB.  PFM to this day monitors all SCTIB revenues, loan repayments, capital cost outlays, and debt programs via our business planning model.

    Credit Ratings and Investor Relations.   Establishing the appropriate credit profile is very important to a successful SIB.  The credit is established at two different levels:  the program as a whole and also each individual project supported by the SIB.  A key assumption in the credit rating methodology is that a loan repayment stream and/or a reserve fund provide adequate risk-adjusted debt coverage and/or liquidity to guard against individual project default.  PFM solicited feedback from the rating agencies early in the process of developing the revenue bond indenture for SCTIB to try to achieve the desired “A” category rating.  Timing was critical, as the Bank had already advanced funds to a project.  Furthermore, PFM recommended to the SCTIB to “tell the story” to potential investors and underwriters.  Consequently, the SCTIB had extensive Rating Agency/Insurer visits to New York and participated in Investor Meetings in New York, Boston, Chicago, and Charlotte.  These Investor Meetings were designed to inform the investor community of the Bank’s goals, objectives, and the first project.  As a result of extensive discussions with the rating agencies, the SCTIB received credit ratings from Moody’s and Fitch of A1 and A, respectively. 

    GARVEE Structure.  The SCDOT appropriates the Highway Funds to SCTIB annually, and SCDOT has also entered into several project loan agreements with the Bank.  However, under SC’s constitution, the SCDOT’s motor fuel taxes can only secure general obligation bonds.  Therefore, these payments from SCDOT to SCTIB are sourced to FHWA Reimbursement Funds.  In order to create a sound security for SCTIB’s revenue bonds, DOT and the Bank entered into a Master Funding Agreement that incorporate industry best practice debt covenants for GARVEE Bonds.  Therefore, SCTIB has effectively become SCDOT’s GARVEE Bonds program. 

    Debt Management for a Large Transportation Issuer.  To date PFM has advised on approximately $3.3 billion of Revenue and General Obligation Bond sales for SCTIB encompassing 15 series of senior lien and junior lien bonds which are listed below:

    1. $275,000,000 Revenue Bonds, Series 1998A
    2. $308,900,000 Revenue Bonds, Series 1999A
    3. $268,810,000 Revenue Bonds, Series 2000A
    4. $249,140,000 Revenue Bonds, Series 2001A
    5. $121,880,000 Revenue Bonds, Series 2001B (Junior Lien)
    6. $285,195,000 Revenue Bonds, Series 2002A
    7. $275,435,000 Revenue Bonds, Series 2003A
    8. $368,300,000 Revenue Refunding Bonds, Series 2003B
    9. $228,840,000 Revenue Bonds, Series 2004A
    10. $153,450,000 Revenue Refunding Bonds, Series 2004B
    11. $60,000,000 General Obligation Bonds, Series 2004A
    12. $221,045,000 Revenue Refunding Bonds, Series 2005A
    13. $286,355,000 Revenue Bonds, Series 2007A
    14. $102,015,000 Revenue Refunding Bonds, Series 2007B
    15. $88,590,000 Revenue Refunding Bonds, Series 2009A
    16. $203,580,000 Revenue Bonds, Series 2010A

    TIFIA Loan.  PFM also assisted the SCTIB in receiving a $215 million direct loan under the USDOT’s TIFIA program.  This innovative transportation financing mechanism allowed the SCTIB to raise capital for a significant portion of its commitment to the Cooper River Bridge project in Charleston, SC.  The loan, which has since been repaid in full, was secured separately from the Revenue Bonds.

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    These materials are based on factual information from actual projects that The PFM Group of companies has engaged in for a client. They are for general information purposes only and are not intended to provide specific advice or a specific recommendation. The results of individual projects will vary significantly depending upon the size and structure of each transaction, permitted investments, prevailing market conditions at the time of the transaction, and other events or circumstances beyond our control. Past performance does not necessarily reflect and is not a guaranty of future results. The information contained in these case studies is not an offer to purchase or sell any securities.