Gov. Dan McKee’s administration now has the green light to borrow $140 million to cover the emergency repair and demolition costs of the westbound Washington Bridge — all at the cost of future federal highway funding over the next 15 years.
Rhode Island Commerce Corp.’s board of directors Monday voted 9-0 to allow the state to tap into Grant Anticipation Revenue Vehicles (GARVEE) bonds. Such financing allows the state to borrow against future allocations of federal transportation money in order to pay off the bonds. Rhode Island is eligible for up to $334.6 million.
Payments will be made through 2039, according to a presentation provided to the Commerce Corporations Access to Capital Committee on July 18. No principal interest will be paid until 2032, at which time the state will be required to pay a rate of 2.7%, Commerce Corp. Managing Director of Financial Programs Neil Martin told the board on Monday.
A term sheet outlining the conditions was not made available, because the bond itself has not yet been sold, said Commerce spokesperson Matthew Touchette. The state expects to close on the bond no later than Aug. 29, according to a presentation provided to the agency’s Access to Capital Committee on July 18.
“We’re working on a tight issuance timeline,” State Budget Officer Joe Codega told Rhode Island Current after the board meeting.
Board members William Stone, Erin Donovan Boyle, and Michael Solomon were not present for Monday’s meeting.
Warwick-based Aetna Bridge Co. was awarded the state’s $45.8 million to tear down the shuttered highway over the Seekonk River, which will likely rise to $48.8 million if the company achieves all its potential incentive payments. The western side of the Washington Bridge was abruptly closed last December after engineers discovered broken anchor rods that put the westbound section of Interstate 195 at risk of collapse.
The state plans to use bond proceeds to cover the emergency phase of the project — estimated by the state at roughly $46 million in May — along with demolition costs.
Aetna’s proposal promised to teardown the bridge by Jan. 29, 2025. The state required the demolition to be complete by March 2025 in its bid request.
The bond itself will be underwritten by Bank of America, one of 14 financial institutions considered for the job. Once the funds are issued, the money will be managed by the Washington Trust Co., Touchette said.
Copies of the banks’ proposals were not made available Monday.
Codega explained the payment structure is meant to wrap around the state’s existing GARVEE debt to ensure the state’s total debt service would be level over the remaining period of the loan.
“Right now there are some existing GARVEE bonds that we’re still paying off over the next five years,” he said in an interview.
The state tapped into such bond money in 2003 to relocate Interstate195 and in subsequent years rehabilitate the eastbound Washington Bridge.
More recently, the state borrowed over $245.9 million toward highway projects following the passage of Rhode Works in 2016. More than $300.5 million still needs to be paid by 2031, according to the July 18 presentation.
In 2020, the state borrowed over $165.5 million toward additional Rhode Works projects such as the northbound section of the Providence Viaduct Bridge on Interstate 95. More than $219 million in payments will be made through 2035.
But the state may not have to tap into all $140 million of the latest GARVEE bond if it can secure a $221 million U.S. Department of Transportation National Infrastructure Project Assistance discretionary grant.
McKee, who chaired Monday’s board meeting, told Rhode Island Current he remains in communication with U.S. Transportation Secretary Pete Buttigieg to determine how much funding the state would get toward replacing the bridge. State officials expect to know whether Rhode Island will be awarded the federal money sometime in the fall.
Should the state get less than the $221 million, McKee’s administration would seek to borrow the remaining GARVEE funds some time in the winter, according to the July 18 presentation.
The $140 million transaction comes as McKee’s administration is asking state departments and agencies to pull back on new spending and hiring in advance of a projected $262.4 million structural deficit for the fiscal year beginning July 1, 2026.
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McKee told Rhode Island Current the Washington Bridge contracts would not be affected by the new spending restrictions. He pointed to additional funding sources, including an $80 million allocation as part of the state’s fiscal year 2025 budget and the possibility of recovering funds through potential litigation.
“The combination of all the dollars there — it’s important that the taxpayers know when something extreme happens, we got the cost of that bridge covered,” McKee said in an interview.
But just how much the final project will cost remains up in the air. Initial estimates ranged between $250 million and $300 million, but McKee’s office in May placed the tab at over $400 million.
The financials behind the project are expected to be clarified after the state issues a second request for proposals to rebuild the bridge. The state on Friday issued a request for information, which aims to collect feedback from construction firms that declined to respond when the state put the contract to replace the bridge out to bid between late April and early July. Feedback must be submitted by noon, Friday, Aug. 2.
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