Yesterday, the Thruway Authority claimed in a press release that it would save $35m in borrowing costs by borrowing $255.7m in Clean Water funds from the Environmental Facilities Corporation. We find this claim baffling and calculate that at most the Thruway (not tax payers) would save $10,074,580, and if it was charged the same ECF administrative fee as towns and counties, it would save $6,926,274. We detail our calculations and assumptions below, but we have no idea how the Thruway arrived at their $35m claim.
In July, the Thruway Authority prevailed upon the Environmental Facilities Corporation (also controlled by the governor) to lend it $255.7m in short term State Clean Water Revolving Fund, “STIFF” funds. At their July board meeting, the Thruway Authority distributed a summary of what they would save by borrowing Clean Water money. Their calculations are based on the difference in borrowing costs two types of Clean Water loans and the Thruway borrowing using a Bond Anticipation Note or BAN at 0.8% interest for five years.
Thruway Savings Using 5 Year Clean Water Revolving Fund STIFF vs. OBO Bond Anticipation Notes
Savings (no ECF fee) = $10,074,580 = Cost of borrowing using OBO vs. STIFF = Cost of OBO – STIFF = $10,074,580 – 0
Savings with ECF fee = $6,926,274 = STIFF Savings – ECF Fee of 0.25%* five years
Cost of borrowing $255,7000 five year BAN = $10,074,580 = (255,700,000*0.8%)*4.925 years
ECF Fee= $3,148,306.25 = (255,7000*0.25%)*4.925 years
Amount borrowed: $255,700,000
Term: 5 years (actual used in TA calculation is 4.925 years)
Interest on BAN: 0.8%
Interest on STIFF: 0%
ECF Admin Fee: 0.25% / year (25 basis points)