Moody’s Investors Service yesterday downgraded the New York Metropolitan Transportation Authority’s revenue bonds to A3 with stable outlook from A2 with negative outlook.
Meanwhile, Barclays Capital yesterday withheld its scheduled pricing for $650 million of bonds on the credit. A source familiar with the matter said until all the rating agencies have been heard from, the pricing is tentatively on hold.
Spokespeople from Barclays would not comment.
“The rating action was prompted by the MTA’s revenue deterioration over the past several months, leading to increased financial strain and liquidity pressure after the MTA had already addressed declining revenues by reducing spending and proposing service cuts to take effect later this year,” Moody’s said in ratings report.
Moody’s cited as reasons for the downgrade revenue deterioration at the MTA over recent months and the disclosure yesterday that revenue estimates from a payroll tax had been cut by $350 million in the current year and $200 million in future years.
Based on the same information, Fitch Ratings late yesterday it “could take an adverse rating action” if the MTA is unable to successfully balance its budget in response to the anticipated shortfalls. “A rating action may also be warranted if the MTA takes action that results in meaningful levels of service degradation or begins to defer essential maintenance,” analysts wrote.
The payroll tax, known as a “mobility tax,” is levied on employers in the 12 counties served by the MTA. The tax was imposed last year as part of a bailout package and had been expected to bring in $1.54 billion in 2010.
Earlier in the day yesterday, the MTA updated the offering document for the bond sale, which was among the largest scheduled for this week, to reflect the reduced mobility-tax expectations.
In addition to the falling revenue projections, Moody’s analyst Nicole Johnson said that the state’s end of the year rescision of $143 million of funding previously appropriated to the MTA to close its own budget deficit had created uncertainty that the state could repeat the action.
The economic downturn has made the MTA’s financial position “significantly tighter,” Johnson said.
“They have a lot of fixed costs [and] there’s still uncertainty about the pace and strength of the economic recovery,” she said.
Over the past two years, the MTA “had been really operating at a deficit” and used surplus cash generated during the boom years to close those gaps, she said.
In August, Moody’s took the authority’s transportation revenue bonds off its watch list for downgrade, where it had been since March, and affirmed its stable outlook. In December, it assigned a negative outlook to the credit.
The MTA passed an $11.98 billion 2010 operating budget in December that if fully implemented would slash services. The authority said yesterday that it would pay close attention to Gov. David Paterson’s executive budget amendment that is scheduled to be released on Tuesday.
“Combined with additional revenue loss previously projected in the governor’s executive budget, the MTA could be faced with up to a $400 million new deficit for 2010,” the the agency said in a statement. “The MTA is considering a variety of cost saving and other measures in addition to those proposed in the December plan to deal with the anticipated additional revenue shortfalls in its operating budget. MTA remains prepared to take needed actions in order to maintain a balanced budget.”
Paterson nixed the MTA’s proposed $28.08 billion five-year capital plan and the authority has been working on a revised plan.
The MTA has $12.24 billion of outstanding debt on its transportation revenue credit, out of $28.62 billion of total bonds outstanding, according to information on its Web site.
Patrick McGee contributed to this story.