Federal authorities last month rejected the state of Alaska's latest request for a low-interest loan for the Knik Arm bridge project, but state officials say they're still negotiating and are confident the loan will eventually come through.
Opponents of the bridge, meanwhile, have seized upon a letter from a U.S. Department of Transportation official that said the federal government was suspending its review of the state's current proposal. The letter said the state needed to "significantly reduce some aggressive assumptions" in traffic and revenue, a long-term criticism of the project's justification.
The state Department of Transportation is seeking a federal loan of more than $375 million through the Transportation Infrastructure Finance and Innovation Act program. As the bridge plan is currently designed, legislation that passed in 2014 prevents the state from issuing bonds to finance it without the federal loan.
In a Feb. 9 letter to the state DOT, Shoshana Lew, chief financial officer for the federal transportation agency, said the proposal still poses too much risk for the federal government.
"As currently structured, your plan of finance would not have sufficient coverage to withstand stress testing and meet DOT's requirements," Lew wrote in the letter. "Therefore, DOT is suspending review of your current (letter of intent) and plan of finance."
State officials said Monday the letter didn't come as a surprise and was simply a step in a negotiation process. Gov. Bill Walker gave the project, and a new loan financing structure, the go-ahead last July, and officials said the federal government was responding to the state's first offer under the new plan.
"Getting this loan isn't just a simple pass-fail, it's a negotiation," said Judy Dougherty, director of the Knik Arm crossing project. "So we were not surprised by that letter."
State officials first submitted a letter of interest in the loan in 2007. The project has been turned down several times.
On Monday, opponents of the bridge held a news conference in Anchorage to release Lew's letter and declare the project wasn't viable. They also challenged the state DOT's estimates for growth in the region.
"This latest rejection proves once and for all that Alaska doesn't have a viable financial plan for the bridge," said Jamie Kenworthy, a critic of the bridge project. He said the state should slash all funding from the Knik Arm project in the proposed operating budget and reallocate elsewhere the roughly $160 million already approved for the project.
Government Hill bridge opponent Stephanie Kesler obtained Lew's letter through a request for an update on the status of the TIFIA loan. She said she questioned why the letter wasn't made public earlier when the state was putting together its operating budget.
Since receiving the letter, Dougherty said, DOT has conducted an analysis through Citibank that she said showed how low the revenue could be before it still covered the TIFIA loan. Dougherty said the analysis showed the revenue could be half of what the state expected, or a third lower than the worst-case scenario, and the project would still be viable.
She said that analysis would be sent back to the federal government as part of the state's response. She said the state is also compiling investment grade ratings opinions from agencies like Standard & Poor's.
"We've gone through an initial round of negotiation and weren't successful, so we're going into another round of negotiation," Dougherty said. "It's not complete. We don't really have any news."
A spokeswoman for Gov. Bill Walker referred questions to the state Department of Transportation. Jeremy Woodrow, a DOT spokesman, said the state would make an announcement if the loan was ultimately rejected, and said Lew's letter didn't cancel the project.
"We are confident the loan will be secured," Woodrow said.
In her letter, Lew, the federal DOT official, said current structure of the state's proposal -- to repay the loan entirely from bridge tolls -- didn't meet the federal transportation agency's underwriting standards.
"DOT encourages you to revise your plan of finance to diversify risk, deleverage the debt, and create a more credit-worthy structure for the whole transaction and specifically the TIFIA loan," Lew wrote.