New York’s Metropolitan Transportation Authority goes to market today with a smaller revenue anticipation note deal than last year, reflecting lower revenue than original expected from a bailout package.
The main revenue source for today’s deal and last year’s is the same but the par amounts being offered are not. Today the MTA plans to price $475 million of Rans compared to the $600 million it priced in July.
A payroll tax imposed on employers in the 12 counties served by the transit agency — known as the regional mobility tax — was the main revenue source backing last year’s notes and it is on this deal as well. In January the MTA board approved the issuance of up to $700 million of Rans.
“We think $475 million is going to be the right amount,” MTA finance director Patrick McCoy said at a finance committee meeting yesterday. “At this point there are no other plans to issue the additional $225 million to get to the $700 million the board approved.”
Regional mobility tax receipts have been disappointing, bringing in $787.8 million last year, 21.2% below the $1 billion forecast for 2009. The weak economy has lowered the collection base, with 17,000 fewer businesses in existence in 2009 to pay the tax than a year earlier, MTA staff said.
Last month, the state Division of Budget informed the agency that the tax would yield $350 million less than the $1.7 billion originally forecast for 2010.
Today’s deal is secured by the mobility tax as well as a series of motor-vehicle related fees approved as part of last year’s bailout. For the year to date, the mobility tax has brought in $417 million, $71.6 million below adopted budget forecasts. Motor-vehicle fees have come in at $61.7 million so far this year, $7.7 million below forecast.
“That refinement of our cash flow occurred after the [January] board meeting and that’s why we’re sizing it the way we are,” McCoy said.
Other state aid and farebox and toll revenue backstop the notes should the first-lien pledges be insufficient. The backstop was in place on last year’s notes deal, too, but wasn’t needed, the MTA said.
“This is just to ensure that we’ve got sort of a belt-and-suspenders approach to the credit,” McCoy said.
Standard & Poor’s rates the deal SP-1-plus, citing “strong projected coverage of note debt service by the [regional mobility tax] and other aid trust receipts as well as the magnitude of other resources available and pledged to note repayment if the RMT is insufficient.”
Despite the lower forecast on the on mobility tax, coverage on the debt is expect remain “relatively strong in our opinion, at 1.38 times,” the rating agency said.
Moody’s Investors Service rates the deal MIG-1 and Fitch Ratings rates it F1-plus.
Citi will lead manage the deal. Hawkins Delafield & Wood LLP is bound counsel and Goldman, Sachs & Co. is financial adviser.
The MTA finance committee also approved cuts to bus and subway service to save the authority $93 million. The cuts were reduced from the $101 million proposed prior to a series of public hearings by the agency.
The service reductions are part of a “doomsday budget” enacted by the board in December to close a $383 million hole that opened up at the end of 2009 after lawmakers cut $143 million of already appropriated funds and mobility tax revenues came up short. The full board is scheduled to vote on the cuts tomorrow.
State Sen. Pedro Espada Jr., D-Bronx, announced yesterday he would support tolling bridges on the East River to raise revenue for the MTA and to save free and reduced subway fares for students. The agency’s plan to reduce and eventually eliminate subsidized student fares to help close its budget gap has been unpopular with politicians and riders.
The bridge tolling was a contentious issue when proposed as part of a bailout plan crafted in 2008 by Richard Ravitch, who is now lieutenant governor. The Legislature rejected bridge tolling last year and crafted its own revenue package, with the region mobility tax as its centerpiece.
