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Colorado RTD Issuing $446.3M for FasTracks Amid Obstacles

DALLAS — The Denver area’s Regional Transportation District plans to issue $446.3 million this week for an ambitious capital program that will need new resources to finish.

Since the 2004 voter authorization for the FasTracks program, total costs for the rail and bus system have grown to $7.4 billion from $4.7 billion before RTD scaled back to $5.7 billion through 2035 by project downsizing and deferrals.

After this week’s deal, the RTD will have about $896 million in unused debt authorization for its FasTracks rail and bus transit expansion program.

To come close to completing the project by its original 2017 target date, district would need additional revenue, possibly through another voter authorization to increase the sales tax. Amid Tea Party fervor against taxes and government, the RTD has avoided calling for a referendum over the past two years.

Without additional revenue, a northwest suburban rail line to Longmont that was part of the original proposal can not be completed for more than 30 years, according to the Denver Post.

The RTD is also seeking to increase revenues by $127 million annually through state legislation that would allow it to apply its sales tax to items that are not now covered, such as soft drinks and candy. The additional revenue could give the district additional bond capacity, according to RTD staff.

This week’s deal is pricing through negotiation with RBC Capital Markets, Goldman Sachs & Co., Loop Capital Markets and Wells Fargo Securities.

The bonds, which reach final maturity in 2032, carry ratings of AA-plus from Standard & Poor’s, Aa2 from Moody’s Investors Service, and AA from Fitch Ratings. Outlooks are stable.

Standard & Poor’s cited RTD’s strong coverage of its annual debt service and “extremely strong” coverage on senior-lien debt.

The district collects a 1% sales tax in its service area under two separate authorizations: an original or base system authorization of 0.6%, and an authorization of 0.4% to fund construction and operation of the FasTracks Project. As long as the 0.6% bonds are outstanding, the 0.4% FasTracks sales tax bonds, including this week’s Series 2013A bonds, are secured by a first lien on the 0.4% sales tax and a second lien on the 0.6% sales tax. Following final maturity of the 0.6% bonds in 2024, the 0.4% bonds are secured by a first lien on the entire 1% tax.

“The Aa2 rating on these bonds reflects the size and diversity of the service area’s economy, recent growth in pledged sales tax revenues, and strong coverage levels,” Moody’s analyst Kenneth Kurtz wrote in his ratings report.

Under the 2004 voter authorization, the RTD was allowed to issue up to $3.477 billion of debt to finance FasTracks. The program was designed to add 121 miles of new light rail and diesel-powered commuter rail transit, 18 miles of new bus rapid transit, 57 additional rapid transit stations, and more than 21,000 new parking spaces.

In addition, the RTD is redeveloping the Union Station in downtown Denver as an intermodal transit hub, with commuter rail connections to Denver International Airport. The district is building the rail line as a public-private partnership and building a rail hub at DIA that will be known as the South Terminal.

The commuter rail line to DIA is known as the Eagle P3 project and has an estimated cost of $1.64 billion. About $1.14 billion for phases 1 and 2 will be funded by future payments from RTD, apart from $397.8 million Eagle P3 conduit bonds and $168 million of subordinate sales tax debt.

The Regional Transportation District anticipates executing a line of credit to provide future interim financing for the Eagle Project pending receipt of a federal New Starts Full Funding Grant Agreement.

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