Nebraska Highway Commission approves state’s first highway bonds

The Nebraska State Highway Commission has signed off on the state’s first bond issue for a highway project.

The commission on Dec. 6 unanimously approved a resolution authorizing up to $200 million of bonds to finance the completion of the U.S. 275 expressway corridor in the northeast part of the state.

The Nebraska Department of Transportation will issue the bonds on behalf of the commission. They will be special obligations of the state payable from the State Highway Capital Improvement Fund and any other funds specifically pledged by the commission.

Piper Sandler is municipal advisor and Kutak Rock is bond counsel on the competitive deal, according to a Dec. 6 presentation to the commission.

NDOT Director Vicki Kramer told The Bond Buyer the department plans to issue the first series of bonds in late January, in the amount of approximately $100 million. The department plans to issue a second set of bonds to fund the completion of the remainder of the corridor in late 2025 or early 2026.

At the December meeting, she told commissioners the move was a long time coming, according to the minutes of the meeting. She said that the bonds are an important tool as the department grapples with construction inflation. Costs are up 16% as of December, she said.

District 5 Commissioner Doug Leafgreen said previous governors “always wanted a pay-as-you-go program,” but at this point in time, it makes more fiscal sense to use bonding.

“This is something that the highway commissioners have been lobbying for years,” said District 1 Commissioner Richard Meginnis. The bonding was finally legislatively authorized in June 2023. 

“Prior to that time, there was little political will in the state to bond for transportation projects,” Meginnis added. “However, that sentiment shifted in recent years to address the completion of the Nebraska Expressway System.”

The authorizing legislation notes that the state legislature decided it was in the best interests of Nebraska taxpayers “to leverage interest rates to offset the challenges that construction inflation and uncertain federal highway funding pose to adequately financing the state’s infrastructure needs.” 

Kramer said the pay-as-you-go policy had been a longstanding position of elected state leaders.

She credited Gov. Jim Pillen with helping to pass the authorizing legislation for the bonds — which, she said, directly linked the issuance of the bonds under the new authority to completion of the expressway system in Nebraska, among other capital improvement priorities.

According to the statute, the bonds cannot exceed $35 million in annual debt service and must mature in 19 years or less. Bonds may not be issued after June 30, 2029, with the exception of refunding bonds. 

“Local communities have long supported this expressway, understanding the safety improvements and economic benefits it brings,” Pillen said in a statement.

“Before bonding was authorized, the U.S. 275 corridor was on track to have smaller individual segments completed by 2027, but the entire corridor would not have been completed until 2033 at the earliest,” Kramer said. “Using bond financing to expedite the projects moves expected corridor completion up to 2029.”

District 3 Commissioner David Copple said in a statement that this corridor of U.S. 275 sees heavy truck traffic and is a key artery for local steelmakers, manufacturers and farmers. 

S&P Global Ratings assigns Nebraska an issuer credit rating of AAA and rates the state’s appropriation debt AA-plus. The outlook is stable.

Moody’s Ratings in December 2023 affirmed the state’s Aa1 issuer rating and revised the outlook to positive. It also affirmed the state’s certificates of participation at Aa2.