State borrows first $800M of $3.5B in bonds for road repairs
Michigan has borrowed about $800 million for road and infrastructure repairs throughout the state.
The closure on the $800 million bond issue is the first installment of the $3.5 billion in bonds Gov. Gretchen Whitmer announced prior to the pandemic after her 45-cents-per-gallon gas tax increase failed to go anywhere in the Republican-led Legislature in 2019.
The bonds, which will be taken out over a four-year span and repaid over the next 25 years, were unveiled during Whitmer's Jan. 29 State of the State address and approved by the Michigan State Transportation Commission the next day.
The $800 million will cover dozens of projects, including construction work starting in 2021 in Wayne, Oakland and Macomb counties. The initial bond also will fund design work in 2021 for other construction projects in Metro Detroit.
“Through bonding, we can completely rebuild some important freeways that we otherwise could only afford to resurface,” said Paul C. Ajegba, director for the Michigan Department of Transportation. “The successful sale of the bonds and positive market reaction also allows us to accelerate some non-freeway projects across the state.”
The $3.5 billion in bonds is expected to cost about $5.2 billion if repaid through $206.6 million annual debt service payments over 25 years. The repayment plan is not expected to falter despite the pandemic, according Moody's Investor Services.
"Michigan's state trunkline bonds are not susceptible to immediate material credit risks related to coronavirus because of strong coverage of debt service and limits on additional leverage," Moody's said. "The longer-term impact will depend on both the severity and duration of the crisis."
The first $800 million installment will help to finance five projects in Metro Detroit beginning next year.
In Wayne County, the money will fund construction on Interstate 275 South from south of M-153 to 5 Mile as well as additional work on I-275 from Northline Road to M-153. The projects are expected to be complete by 2023 and will cost $324 million.
In Oakland County, the bond dollars will finance work on Interstate 96 from I-275 to Kent Lake Road as well as work on Interstate 75 from M-15 to Oakland County line. The I-96 project is expected to be complete by 2023 and cost $217.5 million, while the I-75 project will be finished by 2022 and cost $93.6 million.
In Macomb County, the money will pay for construction work on M-59 from Romeo Plan to Interstate 94. The project is expected to be complete by 2022 and cost $66 million.