DALLAS — The New Orleans Regional Transit Authority will build two new streetcar lines with proceeds from the upcoming negotiated sale of $75 million of sales tax revenue bonds.
The sale is set for Sept. 23, with a combined retail and institutional order period.
NORTA’s revenue bonds are rated Aa3 by Moody’s Investors Service, which had not previously rated the authority’s debt.
Standard & Poor’s, which has not yet released its report on the current bonds, raised its rating to A-minus in August 2009. Standard & Poor’s dropped its rating on NORTA’s tax-supported debt to BBB-minus in 2005, shortly before Hurricane Katrina cut the devastated system’s ridership by more than 70%.
Morgan Keegan & Co. is the lead underwriter for the issue. The underwriting team includes Mesirow Financial Inc. and Jackson Securities LLC.
Foley & Juddell LLC is bond counsel for NORTA. Financial adviser is Grigsby & Associates Inc.
Damon Burns, vice president with Morgan Keegan, said the good ratings are an indication that the New Orleans economy is rebounding strongly from the 2005 storms.
“A lot of good things are happening in New Orleans, and the ratings reflect that,” he said. “There is strong management at the authority, but the ratings are based mainly on the strength of the local economy.”
The bonds are expected to be insured, but no final decision has been made, Burns said.
The bonds are supported by half of the authority’s 1% sales tax in Orleans Parish. The authority also serves Jefferson Parish, but the tax is collected only in Orleans.
Though only half the sales tax is pledged to the bonds, all revenues flow to the trustee and none will be distributed to NORTA until debt-service requirements are made. The tax cannot be lowered or eliminated until the bonds are retired.
The authority has $85 million of outstanding debt.
Sales tax collections have fluctuated considerably in the past 10 years. Revenue rose 13% in 2003, fell 16% in 2004, fell another 14% in 2005, and then grew 8% in 2006 as recovery efforts began. Revenue rose by 3% in 2009 and is expected to show an 18% increase in 2010.
One of the two bond-financed lines will extend New Orleans’ current three-line system into the French Quarter. The four-mile extension will also serve adjacent neighborhoods such as Faubourg Marigny and Treme.
The second phase of the project is a 1.8-mile stretch that will complete the effort to connect the Ernest N. Morial Convention Center with the existing Riverfront and Canal Street streetcar lines.
Work is under way on a third line being financed with a $45 million grant from the U.S. Department of Transportation. The 1.5-mile line, which is to be operational by summer 2012, will run along Loyola Avenue and serve the Union Passenger Terminal train station and the Louisiana Superdome.
The federal funding, which was announced in February, came from the Transportation Investment Generating Economic Recovery stimulus program. NORTA hopes to obtain another federal grant to complete the three new lines.
Total cost of the effort is estimated at $200 million.
If it cannot obtain additional federal funding, the authority said it would have to readjust the project and may not be able to complete the planned three-line extension.
