Fargo-Moorhead flood risk management P3 wins Deal of the Year

The public-private partnership between Red River Valley Alliance and the Metro Flood Diversion Authority won The Bond Buyer’s 21st annual Deal of the Year award for its bonds issued through the Public Finance Authority to reduce local flooding risk. 

The issuance, which was the Deal of the Year in the P3 category, was one component of a three-part debt financing package for the $2.75 billion Fargo-Moorhead Metropolitan Area Flood Risk Management Project. The project will, among other things, dig a 30-mile diversion channel that’s five feet deep and 700 feet wide, build two four-lane interstate bridges, four railroad bridges, 12 county highway bridges, and revamp 13 levees and 27 storm water lift stations.

“Our editorial board selected a financing that features many of the key characteristics we look for in the Deal of the Year,” Mike Scarchilli, editor in chief of The Bond Buyer, said at Tuesday’s gala. “This was a complex public-private partnership, a massive, first-of-its kind project that fostered federal, state, and private-sector collaboration and funding. It met a critical public need, working creatively to solve a problem that needed to be solved. And the deal that resulted set a template for others to follow in the future.”

The Bond Buyer’s editors and senior reporters considered a range of factors when judging entries, including: creativity, the ability to pull a complex transaction together under challenging conditions, the ability to serve as a model for other financings, and the public purpose for which a deal’s proceeds were used.

Even in the bespoke world of U.S. P3 deals, the Fargo-Moorhead Diversion Project stands out for its unique structure and collaboration.

Planning began more than a decade ago to deal with chronic overflow of the Red River and its tributaries that flood during storms and snow melts, regularly submerging parts of Fargo, North Dakota, and Moorhead, Minnesota.

The financing also marks the Army Corps’ first P3 and provides a roadmap for others in the new federal P3 pilot program, which features a pipeline of projects to address flood mitigation and ecosystem restoration around the country.

The awards ceremony, held Dec. 6 at Guastavino’s in New York City also included, for the 12th year, the presentation of the Freda Johnson Award for Trailblazing Women in Public Finance. 

This year marks the eighth in which the organization honored two public finance professionals: one from the public sector and one from the private. The 2022 honorees are Deborah Goldberg, treasurer of the commonwealth of Massachusetts, and Emilie Ninan, public finance partner at Ballard Spahr and co-chair of the firm’s finance department.

Along with Ninan and Goldberg, 12 other honorees from the public and private sectors were recognized as Trailblazing Women in Public Finance by the Northeast Women in Public Finance at the gala.

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The other finalists for Deal of the Year:

SOUTHEAST REGION
The Southeast winner is the Louisiana Utilities Restoration Corp.’s $3.2 billion offering, the largest municipal securities transaction in state history. After being hit with a barrage of storms that damaged the state’s electric infrastructure, Louisiana sought low-cost financing to give relief to a battered electric utility provider and its ratepayers. The solution was a ratepayer-backed utility securitization that was registered as a muni, but structured as a traditional asset-backed securities financing.

FAR WEST REGION
The San Diego County Regional Airport Authority’s $1.94 billion offering is the winner in the Far West. The bond proceeds pay for the replacement of Terminal 1, roadway and parking improvements and a new administration building, and advance refund outstanding bonds for debt service savings. The authority was able to upsize its deal at pricing by $600 million, enabling it to fund projects in out years.

NORTHEAST REGION
The Northeast winner is the District of Columbia’s $309 million long-term P3 agreement with Plenary Infrastructure DC, the nation’s largest urban streetlight modernization project to use the public-private partnership model. It was also the first street lighting project to make use of tax-exempt private-activity bonds, with $144 million of PABs joined by a $15 million tranche of taxable bonds. The final outcome will be modern infrastructure that reduces energy usage by more than 50 percent.

MIDWEST REGION
The city of Joliet, Illinois’ $76.6 million offering of waterworks and sewerage senior lien revenue bond anticipation notes is the winner in the Midwest. The transaction kicked off the first leg of financing of the city’s preliminary 100-year agreement with Chicago to purchase treated Lake Michigan water to stave off a looming drinking-water crisis, a partnership that could serve as a model for communities struggling to manage a dwindling water supply.

SOUTHWEST REGION
The Southwest winner is a $21.7 million deal for Apache County, Arizona’s Window Rock Unified School District No. 8, which serves more than 390 square miles of the Navajo Nation in Arizona. Given the remote nature of the district, affordable housing for teachers is critical, and the units it built decades ago are worn out. To solve the problem, the district leveraged a portion of its annual Federal Impact Aid Revenues.

ESG/GREEN FINANCING
The ESG/Green Financing winner is the commonwealth of Massachusetts’ nearly $2.7 billion social bond deal — the largest social bond deal yet in the ESG space of the muni market. The financing repaid federal dollars for the commonwealth of Massachusetts’ Unemployment Insurance Trust Fund for benefits given to people affected by the COVID-19 pandemic. The financing was a new eligible social project as defined by the ICMA Social Bond Principles.

INNOVATIVE FINANCING
The Alabama Federal Aid Highway Finance Authority is the honoree in the Innovative Financing category for its $1.5 billion offering. Its creative introduction of a new credit structure helped the Authority garner credit ratings that remain among the highest in the nation for a “direct GARVEE with a backstop pledge.”

HEALTH CARE FINANCING
The winner in the Health Care category is the inaugural public offering for the University of Louisville Health. Proceeds from the $411 million deal funded sorely needed capital and liquidity to further UofL Health’s critical mission to its underserved community. UofL has the only level-one trauma center in the region, as well as the region’s only solid organ transplant center.

SMALL ISSUER FINANCING
The Small Issuer honoree is Gallatin County, Montana’s $65 million transaction to fund its Bozeman Fiber project, which brings lightning-fast internet speeds to an area underserved by internet service providers and went live to its first customers in September 2022. The transaction is secured solely by the net revenues generated by the Yellowstone Fiber Network.