LOS ANGELES — The Los Angeles County Metropolitan Agency will be seeking its board's approval in June to borrow $10.2 billion through 2026 to complete the county's planned rail transit network.
The borrowing authority would follow through on a 30-year long-range plan Metro adopted in 2009 that combines improvements to roads with the build-out of a rail transit system designed to deal with the county's notorious traffic congestion.
Metro's funding, in addition to money from fares on its rail and bus systems, is supported by three half-cent sales taxes passed over the previous 20 years including Measure R, passed in 2008, that is primarily dedicated to building out the mass transit system.
"Metro is going to be a good place to do business for a long time," said David Yale, LA Metro's executive officer of countywide planning & development. "We have a real mandate from the public here."
Metro operates the third-largest public transportation system in the United States by ridership with a 1,433-square-mile operating area that has almost 10 million residents, and 2,000 peak hour buses on the street any given business day. It also designed, built and operates 87.8 miles of urban rail service.
The agency is the primary transit provider for Los Angeles providing the bulk of such services while the City of Los Angeles Department of Transportation operates a much smaller system of local shuttles and Commuter Express buses to outlying suburbs of Los Angeles.
Metro recently completed a refunding achieving $20 million in present value savings that was part of a several-year plan to move out of variable rate bonds, said Terry Matsumoto, Metro's chief financial officer.
The savings came through a $138 million competitive refunding that closed Monday on its Series 2013-A Proposition C Sales Tax Revenue Refunding Bonds.
The Prop C bonds were rated AA-plus by Standard & Poor's. Metro's senior bonds funded by Proposition A and the Measure R half-cent sales tax are rated AAA, said David Hitchcock, an S&P analyst. The agency also has subordinate debt that S&P does not rate, Hitchcock said.
The recent issuance received a AA-plus rating because the Prop C sales tax also supports additional bonds assessed at 1.3 times. The coverage on bonds supported by Proposition A and Measure R have double the coverage at 2.6 times and 2.5 times, respectively, he said.
"I don't expect them to bond down further for Prop C, because they use the excess revenue for operations, but they could bond down further," he said adding that is why those bonds are rated AA-plus instead of AAA like the others. Proposition C, also, unlike Measure R, extends into perpetuity while Measure R only extends through 2040.
"They have more than enough revenues to cover debt service," Hitchcock said.
Additionally, Metro is looking at supplementing local funding with federal funding through the proposed America Fast Forward program and the existing TIFIA loan program to accelerate the projects included in its long-range plan, he said.
The agency has flexibility to cut operations if sales tax or fare revenues drop, Hitchcock said.
"There is no mandated service level here," Hitchcock said. "There may be a question of political willingness, but there is no service that has to be provided from a legal standpoint, so they have a lot of flexibility to cut operations costs if they need to."
The agency's moves over the past several years to refund away from variable rate debt are a credit positive, Hitchcock said.
"With the coverage, we were not overly concerned about the variable rate debt they had," Hitchcock said. "One of our primary concerns is the additional bonding — they will have additional debt needs for many years."
Metro has needed to be flexible to keep projects moving forward despite hurdles that have cropped up since the economic crash of 2008.
Metro sought to increase its leverage options by extending Measure R past its 2040 termination date through Measure J, which narrowly failed to obtain the two-thirds supermajority needed to pass in November 2012.
Yale said the board could vote to try another version of Measure J, but will instead likely issue bonds backed by the Proposition A and C sales taxes, because both mandates from voters on those bonds extend into perpetuity.
"Now, the idea is to do a Prop A or C cross over, because we wouldn't have to return to voters to get a two-thirds vote," Yale said.
The board is considering an amendment to Measure R that would make that possible, he said.
"If we can do that and get the tax extension, we would not need federal funding to accelerate the plan," Yale said. "We are borrowing $10.2 billion through 2026 to get all these projects done — and $1.2 billion or $1.3 billion is already out there. There is something like $9 billion in borrowing we still need to do."
Part of that will include TIFIA or America Fast Forward funding, but that will likely not come through this year's federal budget, Yale said.
Metro officials will keep working with electeds on the city, state and federal level to get proposed infrastructure proposals aimed at transportation on the federal level passed, he said.
Following the economic crash, in 2009 Los Angeles Mayor Antonio Villaraigosa crafted a plan termed the 30 / 10 Initiative to combine local, state and federal funding to complete 30 years' worth of projects in 10 years, building out the region's planned rail network faster. Villaraigosa has made building out Los Angeles' mass transit system a priority during his eight years in office.
The mayor wields a lot of power on the board, Yale said.
Villaraigosa, along with the five Los Angeles County Supervisors who sit on the board, helped to usher through in 2008, Measure R, a half-cent sales tax aimed specifically at building out the rail system that is a significant part of Metro's 30-year long-range plan.
Among Metro's projects currently under construction is the second-phase of the Expo Line, which runs from downtown to Santa Monica and will be completed in 2015. The first phase from downtown to Culver City was completed last year.
In June, the board will make decisions on the next steps on a variety of lines and how it will structure long-range funding.
That meeting also marks Mayor Villaraigosa's last Metro meeting.
Metro officials are confident they will have support of their long-range plans from incoming Mayor Eric Garcetti — as Garcetti came out in support of the mayor's transportation plan during his campaign, Yale said.
In addition to Garcetti, Metro will lose powerhouse County Supervisor Zev Yaroslavsky, termed out next summer. County Supervisor Gloria Molina, who is serving out her last term, also has been a strong force on the board.
The 13-member Metro board that governs the agency is comprised of the five Los Angeles County Supervisors, the mayor, three mayoral appointees of which at least one must be a city council member, four city council members from cities other than Los Angeles, and a non-voting governor appointee traditional the director of Caltrans District 7.
But Yale says in addition to public support, which passed Measure R overwhelmingly in 2008, Metro has had support for its projects from the various political leaders.
He sees the change-over in city leadership as bringing new ideas as opposed to likely to slow or derail the long-range plan.
