Kansas to issue first bonds for ‘IKE’ transportation program

The Kansas Department of Transportation expects to head to the municipal market this summer with its first bond issue to help finance a $10 billion, statewide transportation improvement program. 

The $200 million of bonds backed by state highway fund revenue will be sold in a negotiated deal for the 10-year Eisenhower Legacy Transportation Program, which launched in July 2020, according to Steve Hale, a KDOT spokesman.

The program is dubbed “IKE” in honor of Kansas-reared Dwight D. Eisenhower, who launched the Interstate highway program as president.

Hale added that the total amount of bond issuance for the program is estimated at $1.2 billion.

Last week, Gov. Laura Kelly announced the addition of 17 highway modernization and expansion projects totaling $932 million for the IKE program’s development pipeline.

“These highway projects tackle long-standing transportation needs across the state – improving safety, expanding economic development opportunities, and strengthening our communities,” the Democratic governor said in a statement.

The IKE program authorizes the issuance of highway revenue bonds if the state transportation secretary certifies that, as of the date of issuance of any such bonds, the maximum annual debt service on all outstanding bonds and on such bonds proposed to be issued will not exceed 18% of state highway fund revenues projected for the then-current or any future fiscal year, according to KDOT’s fiscal 2023 annual comprehensive financial report.

KDOT data showed motor fuel taxes, a portion of the state sales tax, vehicle fees, and federal reimbursements make up the majority of the $1.9 billion of revenue expected to flow into the highway fund in fiscal 2025.

The state had about $1.5 billion of highway revenue bonds outstanding as of June 30, the end of fiscal 2023. 

Last July, Fitch Ratings upgraded the bonds a notch to AA, citing the steady performance of the pledged revenue stream throughout the pandemic, growth in KDOT’s available fund balances, and improvements in the state’s underlying credit quality. Fitch began rating the state of Kansas in January, assigning it an AA rating.

The highway bonds are rated Aa2 by Moody’s Ratings and AA by S&P Global Ratings, which revised its outlook to positive from stable last year.