This week on The Right-of-Way Report, we covered several developments related to the Oklahoma Turnpike Authority and the ACCESS Oklahoma program. To keep this article focused and manageable, this Substack is dedicated solely to the OTA's upcoming bond sale request and the Council of Bond Oversight (COBO) meeting on June 25. Environmental issues, including concerns related to noise, water resources, wildlife, and the environmental review process, will be covered separately in a future post.
OTA to head to the Council of Bond Oversight this week
At the June 2nd OTA board meeting, the Board voted to authorize the issuance of another $1.5 BILLION in Series 2026A Revenue Bonds, which I discussed in a previous substack.
The OTA is now headed to the Council of Bond Oversight (COBO) on Thursday, June 25th at 10 am in the Oklahoma Capitol Room MP100 to ask for permission. COBO is a 5-member board consisting of one member appointed by the President Pro Tempore of the Senate, one member appointed by the House of Representatives, two members appointed by the Governor, and the State Treasurer. They serve four-year terms.
COBO is directed to determine whether the financing serves a proper public purpose, review compliance with applicable laws and review other relevant matters, including repayment sources and security for the bonds.
The agenda is out. And the OTA is asking for a cool $2.9 BILLION.
Did You Notice OTA Is Asking for Much More Than $1.5 Billion?
The resolution states that OTA wants to generate $1.5 billion for ACCESS Oklahoma construction projects. However, the bond issue must also cover capitalized interest, reserve requirements, costs of issuance, and other financing expenses. As a result, the financial analysis presented to the Board indicates the new-money bond issue could have a face amount approaching $1.9 billion.
In addition, OTA proposes issuing enough bonds to refund approximately $1 billion of existing debt from the 2017 through 2020 bond series. Combined, the total transaction could approach $2.9 billion in bonds, even though only $1.5 billion is intended to fund new construction.
The resolution also seeks bondholder approval to amend two important provisions of the Trust Agreement. First, OTA proposes allowing future second senior bonds to be secured by a separate reserve account or no reserve account, rather than requiring all second senior bonds to share a common reserve account. This would provide the Authority with greater flexibility in structuring future debt issuances. Second, OTA proposes extending the assumed amortization period used in debt calculations from 25 years to 35 years. This change makes it easier to demonstrate sufficient revenue capacity to support additional borrowing.
The long-term implications are significant. Extending amortization periods allows principal repayment to be pushed further into the future. The current issue is expected to include maturities extending 35 years, and Oklahoma law allows OTA to issue revenue bonds with maturities of up to 40 years. If future bond issues continue this trend, repayment obligations could stretch decades beyond the completion of the projects being financed.
The timing of these proposed amendments is also noteworthy. Before this transaction, approximately $2.9 billion of Oklahoma Turnpike System bonds were outstanding. The new financing transaction could add or refinance a similar amount at the same time OTA is seeking approval from bondholders to amend the governing Trust Agreement.
Section 1102 requires approval from holders of a majority of the outstanding principal amount of the affected classes of debt. Notably, the resolution specifically authorizes OTA to obtain consent not only from existing bondholders but also from future purchasers through disclosures contained in the bond documents.
Whether intentional or coincidental, the result could be a significant reshaping of the bondholder base at the same time OTA seeks approval for amendments that would increase its future borrowing flexibility.
Longtime observers may recall a similar episode in 2006, when OTA amended its Trust Agreement to authorize derivative instruments, variable-rate debt, and swap agreements. That amendment also required bondholder approval and substantially changed OTA’s financing structure. The current proposal raises similar questions about how major financing transactions can influence the voting dynamics used to amend the governing bond documents.
In practical terms, this resolution appears designed not only to finance current ACCESS Oklahoma projects, but also to create additional flexibility for future borrowing. If these amendments are approved, OTA could be positioned to carry substantial debt obligations well into the second half of this century, supported by toll revenues collected from future generations of Oklahoma drivers.
Summary of the Proposed Bond Changes
The 150% pricing provision may grab headlines, but the larger story is the Authority’s effort to increase its future borrowing flexibility. Through proposed amendments to the Trust Agreement, OTA is seeking greater discretion in how future bonds are structured while extending key debt calculations from 25 years to 35 years. These changes could make it easier to support additional borrowing and push repayment obligations further into the future.
For bondholders, these amendments may provide greater flexibility in managing the Authority’s debt portfolio. For Oklahoma drivers, however, they could mean more toll-backed financing, more debt carried over longer periods of time, and a greater share of future toll revenues dedicated to debt service rather than reducing existing obligations.
The upcoming bond issue is about more than financing current ACCESS Oklahoma projects. It may also establish the framework for how future turnpike projects are financed and repaid for decades to come.
If you would like to receive notice when bond applications are submitted to the Council of Bond Oversight (COBO), you can request to be added to the distribution list by emailing Alexandra Edwards at alexandra.edwards@treasurer.ok.gov. By law, COBO agendas must be publicly available at least 24 hours before a meeting.
We intend to file an objection to the approval of this bond issue and will continue monitoring the process closely. I have included several of our objections below.
Objections to OTA Issuance of up to $1.5 Billion 2026A Second Senior Revenue Bonds
The Oklahoma Turnpike Authority has and continues to violate statutory provisions of the Turnpike Enabling Act;
a.) they do not comply with the 1989 Master Trust Agreement provisions related to funding Turnpike Projects and Improvements through the issuance of second senior revenue bonds;
b.) they do not comply with the provisions of their By-Laws;
c.) they are changing long-standing policy of the entity;
d.) they are proposing amendments to the Trust Agreement which will significantly impact bond holders and the users of the toll roads; and
e.) they continue to make changes to the ACCESS Program by adding projects.
Following is detailed information regarding many issues and concerns related to the Program.
1. OTA has not complied with and continues to ignore the 1989 Trust Agreement Section 715(a)(1) requirement, and if applicable the certification required by Section 209(e).
1989 Trust Agreement, Article 1: The term “Oklahoma Turnpike System” shall mean (1) the Existing Turnpike Projects, (2) the New Turnpike Projects, (3) all other Turnpike Projects (including additional Turnpike Projects extending any or all of the S.H. 33 Turnpike (U.S. 412), the I-35 to I-40 Turnpike (Ada to Davis Section), the Oklahoma City Outer Loop Expressway (I-35 to Portland Avenue Section) and the Tulsa South Bypass Expressway (U.S. 75 to Memorial Drive Section) which meet the requirements of Section 715(a)(1) and Improvements hereafter constructed by the Authority in accordance with the Enabling Act, and (4) any project reclassified from a General Fund turnpike project to a Turnpike Project in accordance with Section 715(b), subject in all cases to the Authority’s rights under Section 713 hereof.
1989 Trust Agreement, Article 1: The term “Turnpike Project” shall mean any turnpike (including any express highways, superhighways, or motorways), which meets the requirements of Section 715(a)(1) or 715(b), constructed under the provisions of the Enabling Act by the Authority, and shall embrace all bridges, tunnels, overpasses, underpasses, interchanges, entrance plazas, approaches, free access roads, bridges, and road construction, toll houses, service stations, and administration, storage and other buildings which the Authority may deem necessary for the operation of such turnpike.
It is certain that the writers of the 1989 Trust Agreement provided that any extensions to the OKC Outer Loop would be an eligible Turnpike Project to be constructed with proceeds from issuance of Second Senior Revenue Bonds, and would be identified as part of the Oklahoma Turnpike System, if and only if each of the Turnpike Project(s) satisfied the requirements of Section 715(a)(1). Thus, the extensions of the OKC Loop (a) the I-40 to Portland extension in 1998, (b) the Kickapoo and SWJKT extensions in 2017-2018 as part of the Driving Forward program, and (c) the Tri-City Connector and the East-West Connector as part of the ACCESS program, were required to satisfy the Section 715(a)(1) provision of the Trust Agreement. Likewise, other Turnpike Projects, the 1998 H.E. Bailey Spur, the ACCESS South Extension Turnpike, and the Toll Bridge at Bixby, by definition require compliance with Section 715(a)(1).
1989 Trust Agreement, SECTION 715. Requirements for New Turnpike Projects; Reclassification of General Fund Turnpike Projects. (a)(1) The Authority covenants that it will not incur any Second Senior Indebtedness under the provisions of Section 209 of this Agreement in respect of any Turnpike Project as to which the Authority has not previously issued Senior Indebtedness under the provisions of this Agreement or as to which the Authority has previously issued only junior obligations unless the Authority can, in addition to satisfying the conditions to the issuance of such Indebtedness contained in Section 209, and it will not otherwise include as part of the Oklahoma Turnpike System any Turnpike Project, unless the Authority can, estimate that the revenues of such Turnpike Project in the fifth complete bond year following the completion of construction or the acquisition of such Turnpike Project and in each bond year thereafter will be not less than the Current Expenses and the deposits to the Reserve Maintenance Fund for such Turnpike Project for each such bond year.
Section 715(a)(1) requires that the estimated revenues for the extensions to the OKC Outer Loop must be greater than the Current Expenses (basically the O&M costs) plus deposits to the Reserve Maintenance Fund for each of the extension projects, beginning in the fifth complete bond year following completion of the project and for each bond year thereafter. If the revenues are not greater than the O&M and deposits to Reserve Maintenance for such Turnpike Project, the project is not eligible to be constructed with proceeds of Second Senior Revenue Bonds. The Authority may opt to classify the project as a General Fund turnpike project and construct the project according to the provisions of Section 715(a)(2).
Once the determination is made that the Turnpike Project is eligible to be constructed with Second Senior Revenue Bond proceeds; then, the certification is required to be submitted to the Trustee as provided by Section 209-Second Senior Bonds, (e), as follows:
Section 209 (e) in the case of any second senior bonds proposed to be delivered in accordance with this Section in respect of any Turnpike Project for which senior bonds have not been previously issued under Sections 208 or 209 hereof, a certificate, signed by the Chief Executive Officer and approved by the Consulting Engineers, setting forth the Authority’s estimates in respect of such Turnpike Project of (1) the revenues and (2) the sum of the Current Expenses and deposits to the Reserve Maintenance Fund in the fifth complete bond year following the completion of construction or acquisition of such Turnpike Project and in each bond year thereafter for which the second senior bonds then proposed to be delivered shall be outstanding.
Paragraph 4 of Section 209 provides for the Authority to perform debt coverage computations and that the Trustee shall not deliver the proposed bonds until debt coverage computations are satisfied.
Except in the case of second senior bonds issued for completing payment of the cost of any Turnpike Project or Improvement described in the certificate mentioned in clause (c) above in an aggregate principal amount not exceeding five per centum (5%) of the original principal amount of second senior bonds previously issued pursuant to Section 209 to pay the cost of such Project or Improvement, the Trustee shall not deliver such bonds unless in respect of any bonds proposed to be issued and described in the certificate mentioned in clause (e) above, the amount shown in each bond year in item (1) of the certificate mentioned in said clause (e) shall be not less than the sum shown for the corresponding bond year in item (2) of the certificate mentioned in said clause (e) and for all additional senior bonds proposed to be issued pursuant to this Section
Thus, for all second senior revenue bond issues, including bonds proposed to be issued which meet the eligibility requirements of Section 715(a)(1), and to which the Authority certifies to the Trustee such eligibility as provided by Section 209(e); then, the Trust Agreement specifies that such bonds as well as all additional second senior bonds would be incorporated for computation of the required debt coverage percentages.
Why has the Authority disregarded Section 715(a)(1) and Section 209(e) since 1998? The authorizing resolutions for second senior bonds appear to answer the question. The Authority has continuously cited Section 209(i) in the preambles of the bond authorization resolutions in 1998, 2017, 2018, 2023, 2025, and 2026:
WHEREAS, Section 209 of the Trust Agreement authorizes the issuance by the Authority of its second senior revenue bonds to provide funds, together with other available funds, for the purpose of completing payment of the cost of Turnpike Projects and Improvements to the Oklahoma Turnpike System…”
The writers of the resolutions have failed to recognize the difference between Section 209(i) and (ii). The extensions of the OKC Outer Loop are additional segments of the authorized route; yet, by definition the extensions are additional Turnpike Projects.
SECTION 209. Second Senior Bonds. One or more Series of second senior bonds of the Authority may be issued under and secured by this Agreement, from time to time, subject to the conditions hereinafter provided in this Section, for the purpose of (i) completing payment of the cost of any of the New Turnpike Projects or other Turnpike Projects or Improvements for which second senior bonds pursuant to this Section 209 or Parity Indebtedness shall have been theretofore issued, (ii) paying all or any part of the cost of any additional Turnpike Project or Improvement...
Based on the definitions in the Trust Agreement, the 1998, 2017, and 2022 bond issues should have cited Section 209(ii) as the authorization for the OKC Outer Loop projects. Once the extension projects were determined to be eligible to be constructed with Second Senior Revenue bonds, any additional bond issues would then be completion bond issues for such projects and subsequent issuances would be completion bonds as provided by Section 209(i).
It appears that this lack of understanding of the language in the Trust Agreement as to the difference between bonds issued to begin construction of a new Turnpike Project and bonds issued to complete a Turnpike Project has led to significant violation of the provisions of the Trust Agreement.
69 O.S. §1705(e) requires the Authority to determine that turnpike projects be “feasible and economically sound” before they are constructed.
From 1950 through 1989, feasibility studies for the turnpike projects reflected cost and revenue analyses for the duration of the revenue bond issues.
It should be noted that since 1950 to the current time, the Traffic/Revenue Reports have always included estimated revenues for new turnpike projects for the duration of the anticipated revenue bond issues.
However, beginning in 1998, the Consulting Engineer Reports have changed significantly. The 1998 Consulting Engineer provided estimated costs and deposits to the Reserve Maintenance Fund for a period of 5 years after the estimated completion date of the project, which is a requirement of Section 209(d)(v); but, the 30 year costs and deposits to Reserve Maintenance were omitted for the remaining life of the bond issue.
The Authority had changed Consulting Engineers by the time of the Driving Forward program. The Driving Forward Consulting Engineer is still contracted with the Authority for the ACCESS program. Beginning with the Driving Forward program through the ACCESS program, the Consulting Engineer Reports no longer identify costs and deposits to Reserve Maintenance by project. The costs are identified for the programs as “O&M-expanded” on the Projected Operating Results schedules included in the bond documents; however individual project costs are not identified. Also, deposits to Reserve Maintenance are not separately identified for the program or for the individual projects.
This omission of data in the Consulting Engineer Reports prevents the Authority from performing computations required by Section 715(a)(1).
The writers of the Trust Agreement included provisions of Section 715(a)(1) to establish guardrails for the Authority. Turnpike Projects post 1989, must at least provide sufficient revenues to pay such turnpike project’s O&M and deposits to Reserve Maintenance even if the revenues are insufficient to pay the allocable debt service for such new turnpike project.
By ignoring these guardrails, the Authority is constructing economically disastrous routes which strain the financial viability of the Oklahoma Turnpike System as well as harm the security of the bond holders.
This Section 715(a)(1) violation was presented in an objection to COBO in December 2024. Mr. Todd Russ questioned Mr. Echelle regarding the objection during the COBO meeting for approving issuance of the 2025 bonds. Mr. Echelle stated to the Council that the Authority had many consultants and they were familiar with the Authority’s legal documents, and therefore, the Council should be assured that the Authority was in strict compliance with provisions of its legal documents.
Mr. Echelle stated that the Consulting Engineer provided financial data for the Oklahoma Turnpike System as a whole which met the Trust Agreement requirements.
This statement was erroneous.
We have established that all of the documentation that we presented to COBO in December 2024 as well as this document reflect the correct provisions of the Trust Agreement related to issuance of second senior revenue bonds.
It is not the responsibility of consultants to make the determination of compliance with legal documents especially since it is certain that those determinations have a financial benefit for the consultants.
Legal determinations are the Authority’s responsibility.
This brings us to the Authority’s legal counsel and the attorney representing the Attorney General’s office.
There is no ambiguity in the text of the 1989 Trust Agreement as to what constitutes a “Turnpike Project” and the financing provisions for such “Turnpike Project”. This objection citing violations of Sections 715(a)(1) and 209(e) should require a legal opinion for clarification as to why the Authority ignores these provisions of the 1989 Trust Agreement.
2. OTA has not complied with Section 209(d)(v) of the 1989 Trust Agreement.
Before any second senior revenue bonds are to be delivered by the Trustee, the Chief Executive Officer as approved by the Traffic Engineers are to certify to the Trustee that the requirements of Section 209(d)(v) of the 1989 Trust Agreement have been met. The certificate is required to contain specified financial information for a specified term.
In simplified language the schedule is basically an annual cash flow analysis which presents estimated revenues (adjusted to reflect tolls the Authority has covenanted to put in effect as projects are completed), deposits to the Turnpike Trust Fund, O&M costs, deposits to the Reserve Maintenance Fund, and deposits to Bond Reserve Accounts.
This information is required to be presented beginning in the first bond year immediately after the estimated completion date of Turnpike Projects or Improvements and in each bond year thereafter including the fifth complete bond year immediately after the completion date as estimated by the Consulting Engineer.
All of the projects of the ACCESS Program are currently scheduled to be completed by 2036, except for the Gilcrease as reflected on the ACCESS website.
The Gilcrease has a “To Be Determined” completion date.
If we ignore the Gilcrease; then, this means that the financial analysis as certified by the CEO and Traffic Engineer must be presented through 2041, which is the fifth complete bond year following the estimated completion date of the ACCESS projects. This financial information as identified in Section 209(d)(v) is needed to calculate the debt coverage percentages as required by Section 209(I)(C) and (D). This means that financial information regarding all bonds anticipated to be issued as part of the ACCESS Program, as well as estimated revenues and costs, through 2041 would need to be made available to perform the computations for debt coverage percentages. If the Gilcrease is taken into consideration, it is not possible to do the computation because the Authority has not provided an estimated completion date.
This computation becomes even more questionable since the Authority has now added another project to the ACCESS Program, the Toll Bridge at Bixby, as noted in #4 below, Additional Turnpike Projects.
The Authority has not provided the required computations for the issuance of the 2023 bonds, the 2025 bonds, and I am fairly certain that the Authority has not included this information for issuance of the 2026 bonds.
3. OTA Proposed Amendments to the 1989 Trust Agreement
I could not understand why Mr. Russ told the audience during the meeting for approving the 2023 COBO application, that the Council was only making a determination for approving the 2023 bonds, exclusive of the entire ACCESS Program. It is not rational to approve a portion of a 15 year capital financing program.
As an accountant and financial analyst, I would require supporting documentation for the complete financial plan of the ACCESS program, if in fact I was expected to approve portions of a plan over a period of time.
This becomes even more concerning now that the Authority is intending for the 2026 bonds have a 35 year maturity whereas in the past all bonds had a 30 year maturity. The Authority had adopted this 30 year bond maturity policy to be consistent with the useful life of the infrastructure (roads and bridges) for depreciation purposes.
Now there is a deviation.
What other deviations will develop over the next 10 years (2036-2026).
Not only is the Authority proposing lengthening the maturity life from 30 to 35 years for future second senior revenue bond issues, but the Authority is also proposing increasing the amortization period of Balloon Indebtedness from 25 to 35 years. This proposal impacts the debt coverage calculations required by Section 209(I)(C) and (D). The Authority has begun to back-load significant maturities of the ACCESS Program bond issues. Ninety-eight (98) percent of the $500 million 2023 bond issue is scheduled to mature in the in the issue’s final five years 2049 through 2053. Thirty-three (33) percent of the $1.1 billion 2025A bond issue is scheduled to mature in the issue’s final two years 2054 and 2055. The Authority has estimated the cost of the program is $8.2 billion; thus, this leaves another $6.6 billion of anticipated amount of bond issuances. Is the Authority anticipating issuing Balloon Indebtedness on this $6.6 billion and back-load significant amounts of bonded indebtedness?
What is the financial plan for the ACCESS Program as a whole?
Another proposed amendment to the 1989 Trust Agreement is the reduction or elimination of Bond Reserve Account requirements upon issuance of future second senior bond issues.
This is a significant change to the security provided to future bond holders.
All I can say about this provision is “LET THE BUYER BEWARE”, as this is a significant deviation from most revenue bond indenture provisions.
4. ADDITIONAL TURNPIKE PROJECTS
The Gilcrease Expressway Expansion
The 2022 list of Turnpike Projects and Improvements of the ACCESS Program included the Gilcrease Expressway Expansion at an estimated cost of $495,000,000. This project was also included in the August 13, 2023 application to COBO requesting the first approval of bonds for the ACCESS Program.
This project appears to be on hold and there is no estimated completion date for this project listed on the ACCESS website.
This project is a segment of the route authorized by 69 O.S. §1705(e)(35). The initial segment of this route was constructed as a non-system turnpike.
What are the issues with this project?
(i) The Authority has violated Section 209(c) which requires that the Consulting Engineer provide the description of the project, the estimate cost of the project, the estimated completion date of the project and a certification that the proceeds of such bonds required to finance the project together with other funds made or to be made available will be sufficient for paying such cost.
This requirement is violated because
(a) the Authority has not yet determined if the Gilcrease Expansion will be funded by revenue bonds or some other method as was the original segment of the Gilcrease,
(b) there is no estimated completion date but reflects “To Be Determined” on the ACCESS website, and
(c) the certification to the Trustee is incomplete.
The Section 209(c) certification dated October 23, 2023, actually does not list estimated completion dates for any of the ACCESS Program projects. The certification under this section of the Trust Agreement also requires the signature of the Chief Executive Officer of the Authority.
(ii) The feasibility of the project has not met the requirements of Section 715(a)(1) since the first segment of the route was not constructed using second senior revenue bonds and is a non-system turnpike, this second segment could only be funded with second senior bonds and become part of the Oklahoma Turnpike System if it meets the requirements of Section 715(a)(1).
(iii) The CDM Smith (Traffic/Revenue Consultant) Report dated December 9, 2024 does not have any forecasted revenues for the Gilcrease project. Without a revenue analysis, there can be no feasibility analysis as required by 69 O.S. 1705(e). Likewise, the Consulting Engineer has not provided the required financial data regarding the Gilcrease. The Authority clouts their right to determine the feasibility and economic soundness of a project; but, how can the Authority make that determination when there is no data provided to do an analysis?
RESULT: The Authority does not know how they intend to finance the Gilcrease and whether it will be part of the Oklahoma Turnpike System or a non-system turnpike; they don’t know when they will construct the project or when the estimated completion date will be; they did not update the estimated cost of the project when all other project costs were updated ($5 billion to $8.2 billion); and they don’t have the financial data to do a feasibility analysis; yet it is listed as an ACCESS Program project!
Additional Improvement Projects
On November 7, 2024, Mr. Echelle announced to the Authority Board that the staff intended to add three new projects to the ACCESS Program.
The projects added were:
a.) the Muskogee bridge rehab project on the Arkansas River,
b.) the Muskogee pavement reconstruction MP 12 to MP 19, and
c.) the H.E. Bailey pavement reconstruction from MP 20.2 to MP 30.5.
The Authority included these three projects on COBO’s application for approval of bonds form dated November 15, 2024, and listed the projects under “Interchange Improvement Projects.” These three projects had been part of the Authority’s capital plan until the Authority transferred them to the ACCESS program. These projects were not considered as part of the ACCESS Program in 2022 nor were they identified in any exhibits.
A Toll Bridge in Tulsa Crossing the Arkansas River in the Vicinity of Bixby
In May, 2026, the Legislature approved the above described turnpike project. On June 2, 2026, the Authority approved Agenda Item 1400, a reimbursement resolution related to projects identified as part of the ACCESS Program. The toll bridge was added to Exhibit A, a list of the ACCESS Program projects.
Again, the Authority has bypassed any feasibility analysis and merely added another project to the ACCESS Program. T
here has been no engineering analysis or traffic/revenue analysis for this project.
There is no preliminary environmental analysis.
There is no specific location!
How can this toll bridge become part of a capital program with absolutely no preliminary engineering or financial analysis!
5. THE OTA HAS NOT COMPLIED WITH THE PAR FORMULA BOND PRICING REQUIREMENTS OF 69 O.S. § 1709.
69 O.S. 1709(D)(4) provides that turnpike bonds may bear interest at a rate or rates that may vary as permitted pursuant to a par formula and for such period or periods of time, all as may be determined by the Authority;
69 O.S. § 1709 (E)(2) defines “par formula” as follows:
“Par formula” means any provision or formula adopted by the Authority to provide for the adjustment, from time to time, of the interest rate or rates borne by any such bonds so that the purchase price of such bonds in the open market would be as close to par as possible.
Since 2017, the Authority’s bond authorization resolutions have provided that the purchase price of the bonds as a percentage of par has continued to increase dramatically. The positive cash flow from the premiums in 2011 and 2017 allowed the Authority to violate Section 518 of the Trust Agreement.
The Trust Agreement was amended in 2006 when the Authority issued variable rate debt and entered into 5 swap agreements in order to reduce the risk of the variable rate debt. The rating agencies required Section 518 be added as a measure to prevent the Authority from terminating the swap agreements early due to the significant cost to terminate. Section 518 required swap termination fees to be paid from the General Fund. The Authority refunded a portion of the 2006 bonds in 2011 and terminated 2 swap agreements at a cost of $52 million. The Authority did not pay the termination fee from the General Fund but issued the 2011 bonds at a premium thus using the premium to pay the cost of the 2 swap termination fees. In 2017, the Authority refunded the remaining 2006 bonds and terminated the remaining 3 swap agreements at a cost of $41 million. The Authority did not pay the termination fee from the General Fund but issued the 2017 bonds at a premium thus using the premium to pay the cost of the 3 swap termination fees. The Authority violated Section 518 of the Trust Agreement in 2011 and 2017. The following worksheet reflects the approval by the Authority’s Board of the authorizing resolutions setting the purchase price of the bonds at inflated percentages of par.
When construed together, the intent of 69 O.S. §1709 provisions is to place some guardrails on the Authority’s pricing of its bonds. The Authority clearly has some discretion in pricing, but the par formula requirement keeps the Authority from inflating pricing of its bonds.
Following is an example of maturity schedules of the 2011A bonds showing that bonds with same year maturities were issued at par and some at inflated rates. $465,655,000 of the $524,010,000 face amount of bonds was issued at inflated rates well above par. This is 89% of the issue. For every year that bonds mature at inflated rates, there are also bonds that mature at par. Thus, bonds can be priced at par!
The Authority has not justified how this much of a pricing markup over par would comply with the par formula requirements of 69 O.S. § 1709.
The By-Laws of the Authority, Article VI, Section 3, specifically states that “All trust indentures executed by the Authority upon the sale of bonds in accordance with provisions of the Enabling Act shall be strictly complied with.
The pricing mark-up over par is a clear violation of 69 O.S. §1709.
Why This Matters
The issues surrounding this bond application extend far beyond a single $1.5 billion construction program. As outlined above, the June 25th COBO application involves a financing transaction approaching $2.9 billion, proposed amendments to the Trust Agreement that could increase OTA’s future borrowing flexibility, questions regarding compliance with long-standing bond covenants, and the continued expansion of the ACCESS Program through the addition of new projects.
At its core, this is a discussion about transparency, accountability, and the long-term financial obligations being placed on Oklahoma drivers and future generations. Decisions made today regarding debt structure, bondholder protections, amortization schedules, and project eligibility could influence Oklahoma’s toll road system for decades to come.
The Council of Bond Oversight exists to ensure that public financing serves a proper public purpose and complies with applicable laws. We believe these issues deserve careful review and open discussion before another multi-billion-dollar bond transaction moves forward.
In addition to these material objections, Title 90, Section 10-3-4(a)(3)(I) states that the State Bond Advisor, and staff to the COBO, Alexandra Edwards, is required to review the following documents prior to final approval, which include a “(I) Letter from issuer’s attorney or bond counsel stating that there is no litigation pending or threatened relating to outstanding or proposed obligations or the issuer’s authority to enter into any agreements necessary to complete the proposed transaction.”
Just as litigation helped stop the 2022 bond sale, a filed federal or state lawsuit challenging the legality of any part of the ACCESS program could once again prevent the OTA from obtaining final bond approval until the courts determine whether the project can legally move forward.
Please consider attending the COBO meeting on Thursday, June 25th at 10:00 a.m. in Room MP100 at the Oklahoma State Capitol and make it apparent that the public wants COBO to hold the OTA accountable. Your presence matters. Public oversight only works when the public shows up.
PIKE OFF OTA will be presenting objections to the proposed bond issuance and requesting that COBO fully examine the legal, financial, and policy issues raised in this article before granting approval. We will also make sure they are aware of their legal responsibility to halt a bond sale while litigation “relating to outstanding or proposed obligations,” is “pending or threatened.”
We hope you will join us and help ensure that these important decisions receive the scrutiny they deserve.
