ITD disputes GARVEE criticism

The new audit suggests that the Idaho Transportation Department could be out $19.6 million due to the cost of “negative arbitrage” on future GARVEE bond issuances - the cost related to cash balances awaiting payment for project costs borrowed at high long-term rates, but invested at lower short-term rates. ITD disputes that. “The $19.6 million identified in the audit is a largely hypothetical figure based on deliberately conservative short-term and long-term interest rate assumptions in the financing model for planning purposes as of July 2008,” ITD wrote in a response to the audit. “There is no assurance that negative arbitrage will exist on future transactions. … The department chose to secure long-term financing for the major functions of projects in advance of awarding contracts to ensure that the specified work is funded and to avoid interest rate risk. This conservative approach … protected the state from recent uncertainty in the credit markets.”