Fitch Ratings has assigned an A rating to the Metropolitan Transportation Authority (MTA), New York's $500 million transportation revenue bonds series 2015. The Rating Outlook is Stable.
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Additionally, Fitch has affirmed the A rating on approximately $19.5 billion (excluding bond anticipation notes [BANs] and commercial paper [CP]) in outstanding MTA transportation revenue bonds.
The A rating reflects the gross lien on a diverse stream of pledged revenues, the essentiality of the MTA's transit network to the economy of the New York region, and the demonstrated ability of the MTA to produce near-term solutions for its operating and capital needs. The rating also reflects the need to generate sufficient cash to adequately cover operations of the system despite high debt service coverage ratios (DSCRs).
The MTA transportation network is essential to the economy of the New York region, with New York City Transit carrying an average of 8.05 million daily subway and bus riders and Metro-North Railroad and Long Island Rail Road (LIRR) carrying another 576,000 daily commuter rail passengers.
While an independent authority, the MTA has received significant support from the State of New York in the form of additional tax sources aimed at closing projected operating budget gaps and addressing capital needs.
Despite high DSCRs from gross pledged revenues, the MTA's financial position is constrained given its extremely large operating profile and high fixed costs, including significant retiree pension benefits. In addition, some of the MTA's operating subsidies are vulnerable to economic conditions.
While the MTA is required to provide a balanced current year budget, some tools available to meet a balanced budget, such as service reductions and fare increases, are politically unpopular.
The bonds are secured by a gross lien on a diverse stream of pledged operating revenues consisting of transit and commuter fares and excess bridge tolls and non-operating revenues consisting of various regional taxes.
While the MTA's 2015-19 Proposed $29 billion Capital Program (Transit and Commuter Programs) was vetoed by the Capital Programs Review Board (CPRB), the proposed Transit and Commuter Capital Program assumes around $4 billion in MTA related debt. The proposed plan has a roughly $15.2 billion gap in funding which is expected to be funded through a combination of additional federal, state and/or local resources or potentially additional MTA debt.
The proposed TBTA Capital Program (not subject to CPRB approval) is estimated to be $3.1 billion with approximately $2.3 billion funded from TBTA bonds. The MTA has historically faced the constant challenge of delicately balancing the large rehabilitation needs of the system and expansion projects while covering operating expenses and maintaining financial flexibility. ■