They both receive a dedicated portion of Massachusetts' underperforming sales tax revenue, yet the Massachusetts Bay Transportation Authority anticipates selling roughly $300 million of new-money bonds in October while the Massachusetts School Building Authority will hold off on new borrowing until 2009.
Each year the commonwealth reserves a portion of its 5% sales tax for the two agencies. MBTA receives 20% of sales-tax dollars and MSBA will gain a full 20% as well beginning in fiscal 2011 after six years of a gradual phase-in of the dedication.
Massachusetts' sales tax revenues have increased by only 1.1% between fiscal 2006 and fiscal 2007 and 0.05% the following year, according to MSBA spokesman Brian McLaughlin. That leaves sales tax revenues falling short of meeting the state's base minimum on the dedications. MSBA officials were anticipating an average annual sales tax increase of 4.5% while the MBTA was hoping for a 5% yearly boost in sales tax receipts.
In fiscal 2008 and fiscal 2007, the state paid MBTA $65 million and $41 million, respectively, from the general fund in order to reach the base minimum allocation of $756 million for 2008 and $733 million for 2007. For MSBA, the state added $47.6 million and $17.8 million in fiscal 2008 and fiscal 2007, respectively, on top of the sales-tax dedication to meet a mandatory allocation of $634.7 million and $557.4 million.
In MSBA's case, the authority's base minimum will end in fiscal 2011, with the program running solely on the 20% dedication, regardless of how the sales tax performs.
Earlier this year, the MBTA decided to postpone a new-money deal until 2009, but now the authority feels that market conditions and a need to support its capital program through long-term borrowing necessitates a fall transaction. Officials are currently reviewing 10 final applicants for underwriter for the deal and anticipate forming an underwriting team within the next couple of weeks, according to Jonathan Davis, the MBTA's chief financial officer. The authority is not looking to insure the bonds.
"We do like where interest rates are right now, but it's also forward-funding the capital program," Davis said. "We are using our commercial paper program right now to fund the capital program. I felt that our projection of capital spending - where it has been and where it's going to be - probably warrants us going out a little bit earlier than we thought. But I would think that market conditions weigh heavily in that decision."
And while the market seems primed for new-money bonds, Davis said he does not anticipate tagging on a refunding portion to the sale as the authority has yet to see a refunding candidate that would generate a minimum savings of 3%.
Capital improvements could help the MBTA increase its customers. Ridership within MBTA's system has boomed by 6.1% over the last six months as soaring gas prices have encouraged people to take buses and commuter trains instead of driving.
The MBTA oversees a system of buses, rapid-transit lines, subways, and commuter lines with an average weekday ridership of roughly 1.1 million passenger trips, according to its Web site.
While MBTA prepares its fall borrowing, the MSBA will not issue any new-money debt this year. Officials said the authority still has enough funds from its sizeable, $1.5 billion new-money deal that priced in March 2007. But, the authority is considering heading back to the market next year to support school construction throughout the state.
