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 November 5, 1999

How the parkway is financed

In order to pay for the 10-mile toll road expected to open in 2003, the Northwest Parkway Public Highway Authority will issue bonds totaling approximately $225 million to $250 million. The bonds will be issued in $5,000 denominations to institutional and individual investors, says Dick Fontane, senior vice president of George K. Baum, the investment banking firm hired to underwrite the issuance.

“The Authority would like to be able to sell bonds in August 2000,” Fontane said. A delay could come from any problems with neighboring Segment IV of the E-470 parkway or the results of the financial analysis. Studies nailing down a final price for the project also will identify what the toll rate should be, which is usually established on a per-mile basis.

Once the analysis is complete, a firm such as Standard & Poor’s or Moodys will give an investment grade rating; the best possible rating is AAA, which lowers the interest rate.

“Then you go into the marketplace and sell the bonds,” Fontane said. “The investor is relying on the results of the feasibility study when purchasing these types of bonds.”

Bonds will cover design, engineering, construction, construction oversight, right-of-way acquisition, operating funds during the construction period and monies to repay major consultants helping to put together the financing package.

“It will also include planned debt service reserve funds above and beyond what would normally be required,” says Authority Executive Director Steve Hogan. “The purpose of that is to hedge against traffic we think will be there but may not be there. Once we are completed and open and operating, the toll revenues will be sufficient on a yearly basis to cover our operating costs and cover our required repayment schedule.”

If funds are short from the toll revenues in the early years, says Hogan, the additional funds borrowed by the Authority will cover debt.

In order to pay for the 10-mile toll road expected to open in 2003, the Northwest Parkway Public Highway Authority will issue bonds totaling approximately $225 million to $250 million. The bonds will be issued in $5,000 denominations to institutional and individual investors, says Dick Fontane, senior vice president of George K. Baum, the investment banking firm hired to underwrite the issuance.

“The Authority would like to be able to sell bonds in August 2000,” Fontane said. A delay could come from any problems with neighboring Segment IV of the E-470 parkway or the results of the financial analysis. Studies nailing…

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