Infrastructure

$165 million cash-flow gap prompts line of credit for I Street Bridge.

Vitaliy Moskalenko

27 Aug 2025 — 4 min read

A rendering of the future I Street Bridge shows a modern tied-arch lift span with wide sidewalks, bike lanes, and vehicle lanes connecting Sacramento to West Sacramento. Courtesy of TYLin International.

At its August 14 meeting, the Sacramento Transportation Authority discussed funding for the $300 million I Street Bridge Replacement Project connecting Sacramento’s Railyards to West Sacramento.

The meeting’s main goal was to guide solutions for a projected short-term funding gap, estimated at up to $165 million, without delaying construction.

The new I Street Bridge will feature 12-foot shared-use paths for pedestrians and cyclists, and wider lanes for buses and emergency vehicles. The design improves trail access and travel between regional destinations. After the new bridge opens, the 1911-built I Street Bridge will remain for pedestrians and cyclists on its upper deck, enhancing non-motorized connections.

A rendering of the new I Street Bridge highlights wide pedestrian walkways, bike lanes, and lift towers. Courtesy of TYLin International.

Most of the project’s funding comes from state and federal grants, with more than $250 million from the State’s Highway Bridge Program. These grants cover the full cost, but the City only gets reimbursed after paying expenses up front. This means construction costs will often be higher than the funds coming in during the building phase. Construction is set to start in 2026 and finish in 2030, but the City may keep receiving reimbursements until 2038. This creates a gap between when the City pays for work and when it gets the money back.

To address this timing issue, STA and its advisor, PFM, proposed a revolving line of credit. This allows the city to draw funds as needed and repay them when grant money is received, enabling construction to continue without delay.

A chart illustrates the I Street Bridge project’s construction costs outpacing grant reimbursements between 2026 and 2029, creating a peak funding shortfall of over $160 million before repayments gradually reduce the gap through 2032. Courtesy of PFM.

PFM’s Peter Shellenberger explained to the board that the project does not face a long-term funding shortfall, but there is an urgent need for short-term financing to cover costs before reimbursements arrive. When asked if his financial risk analysis included possible future increases in construction costs, he said it did not. This raised concerns among board members, since large projects often end up costing more than initially estimated.

Currently, the interest cost for the line of credit is expected to be about $40.6 million, based on a 3.93% rate for borrowed money and 0.35% for unused credit. If rates fall to the five-year average, the cost could be closer to $27.5 million. The City of Sacramento will cover these costs, and West Sacramento has agreed to pay half of the interest and fees.

To secure the line of credit, STA would use the strength of its Measure A sales tax revenue, which has a AAA credit rating. However, to shield other jurisdictions from financial risk, the repayment guarantee would be limited to the City of Sacramento’s share of Measure A’s City Street and County Road Maintenance Program.

Several board members raised questions about risk exposure, including the possibility that the line of credit might be used and grant funds might not arrive for repayment. In response, PFM conducted an extreme-case risk assessment, assuming that no grant funds would be received. Even in this scenario, the City of Sacramento would have sufficient Measure A funding allocated through 2038 to cover all principal, interest, and fees.

A funding table shows Sacramento’s future Measure A allocations through 2038 compared against interest, fees, and principal payments on the I Street Bridge line of credit, confirming the city has sufficient capacity each year to cover all obligations. Courtesy of PFM.

The next steps are to draft an agreement between STA and the City of Sacramento, finish the legal and financing paperwork, and ask banks to submit proposals to provide the line of credit. Construction bidding should happen this winter, and the Sacramento City Council plans to award the contract in spring 2026.

For now, the board did not take a final vote but told staff to keep working on the financing agreements. The final terms will come back for approval later, and the process will include public transparency.