DART Hits the Spot With Upgrade and Strong Fiscals

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DALLAS — Two years after sharply retrenching in a harsh economy, Dallas Area Rapid Transit is enjoying a lift in its credit score from Fitch Ratings along with rising sales tax revenue and lower construction costs.

Fitch this month raised DART to AA from AA-minus as the rating agency increased its focus on operating risk and qualitative factors for tax-supported transit systems.

Fitch analyst Larry Levitz noted that DART’s “sizable increase in year-over-year fiscal 2011 sales tax collections reverses two years of recession-led declines.”

However, Levitz cautioned that “long-term sales tax trends have shown only modest growth.”

DART officials have met recently with analysts as the authority seeks ratings on a federal TIFIA (Transportation Infrastructure Finance and Innovation Act) loan that’s pegged at $115 million to $120 million.

Standard & Poor’s rates DART’s senior sales-tax debt AA-plus, while Moody’s Investors Service rates them Aa2, both with stable outlooks.

DART has issued more than $3 billion of sales tax bonds over the past five years to finance the large-scale expansion of its light-rail system, including a new Green Line that links with a Denton County commuter line to the north.

Debt service costs are projected to account for 32% of combined operating expenses and debt service by fiscal 2015, according to Fitch.

“However, as DART has completed the bulk of construction, future planned debt issuance is generally moderate,” Levitz observed.

With the TIFIA loan expected to be awarded in September, DART will launch the next phase of its Orange Line that will reach from Irving to Dallas-Fort Worth International Airport.

With a total length of 14 miles, the Orange Line will represent the first light-rail link to the airport and is projected to begin service in 2014.

The line was expected to be delayed in June 2010 when sales tax revenue continued falling as construction costs soared, raising doubts about DART’s ability to maintain its expansion plans.

With Irving, a charter DART-member city, demanding that the long-promised line come to fruition, the transit agency made adjustments that allowed construction to take place.

The current lower cost of construction and the historically low cost of finance are prodding DART to act as quickly as possible on the remaining projects.

“We want to do all we can while we have this window of opportunity, because we’ve seen it the other way,” said DART chief financial officer David Leininger.

Leininger joined the agency as CFO in December 2008 as the financial markets were in turmoil and issuers nationwide were scrambling to adjust to the meltdown of Lehman Bros.

Leininger was previously CFO and managing director of development services and economic initiatives for the city of Irving.

As the major suburb between Dallas and DFW Airport, Irving is aggressively seeking to take advantage of light rail and its proximity to the airport with “transit-oriented development.”

The mixed-use business, residential and resort center of Las Colinas recently added a new convention center on the Orange Line financed with Irving’s bonds.

For the entire Dallas-Fort Worth area, 2014 will be an eventful year in transportation, with the Orange Line, new highways to DFW Airport, and completely remodeled terminals at both DFW and Dallas Love Field.

That year, for the first time, the two airports will compete on long-range flights as the so-called Wright Amendment is repealed.

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Transportation industry Texas
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