Denial of Federal Loan Cancels Bridge’s Finance Plan: Project Apparently Dead

March 21st, 2016

On Feb 9, 2016 the US Department of Transportation turned down a Letter of Interest loan application for a $378 million TIFIA loan and $15 M TIGER grant. (See TIFIA letter here). By the terms of the passed KABATA Bill HB 23, the necessary state bonding for the project was contingent upon receipt of a low cost 3.5 % federal loan with no interest payments for five years for one third of the project costs. This is at least the seventh TIFIA application KABATA/DOT has submitted and it has yet to advance past the letter of interest initial review stage.

In its review of the KABATA/DOT application, TIFIA CFO Shoshana Lew cited “aggressive assumptions in your traffic and revenue study” in informing KABATA/DOT project financial officer Kevin Hemenway that TIFIA is “suspending review” of the application since the application could not meet “(US)DOT underwriting standards.” Many of the aggressive population and traffic count assumptions cited by TIFIA were documented in the 10/13/15 post below and are familiar to readers of this blog over the past five years. Per the state checkbook, in the past three years, KABATA/DOT has directed at least $2,242,636.04 to two major contractors for the new numbers – which TIFIA has now rejected: CDM Smith of California (the same traffic and revenue consultant criticized in the 2013 LB&A Audit of the project) and Cardno, Inc. of Portland, Oregon.

A copy of the press release from Scott Goldsmith and Jamie Kenworthy is available here.

Some legislators may find the timing on the delayed release of the loan rejection news to be curious. The TIFIA rejection letter to Kevin Hemenway was dated February 9, 2016. On February 16 Government Hill Community Council President Stephanie Kesler requested from the Director of the Knik Arm Crossing Project, all recent correspondence from TIFIA to KABATA/DOT. On March 9th, the Director made the February 9 letter available to Kesler.

Both houses of the legislature have now passed their version of the DOT operating budget for next year and the two versions sit in Conference Committee. The capital budget has yet to pass either house and the Department of Transportation lacks the 9% matching funds necessary to use all the federal funds available on July 1, 2016. So, the big question is: Will legislators keep their $168 million commitment to the bridge that now has no finance plan or will those funds be made available to fund additional projects and increase jobs this construction season?