NEW YORK - New York’s Metropolitan Transportation Authority plans to issue up to $750 million of taxable Build America Bonds next week to prefund its 2011 capital needs, staff announced at a finance committee meeting Monday.
The deal will allow the MTA to take advantage of the BAB program before it expires at the end of the month.
“We had been hopeful that there would be some effort in Congress to renew the program, or extend it in some way,” said MTA finance director Patrick McCoy. “It appears that that is not going to happen, and so we’ve taken a look at market rates that would enable us to get into the market before the end of the year and issue these bonds.”
If issued in the full amount, the BABs would cover about 45% of the MTA’s estimated $1.65 billion of new-money borrowing for 2011 capital spending. The deal is contingent on market conditions and would likely price around Dec. 22 and close Dec. 28 or Dec. 29.
The debt would be issued using the MTA’s transportation revenue bond credit, which is backed by diverse revenue streams that include subway and bus fares.
McCoy said that in the current market, they expect to pay a true interest cost of 5.25% on a tax-exempt basis, but a rate of 4.65% with BABs, which include a 35% federal interest cost subsidy. The 2011 proposed budget assumes interest rate costs of 5.45% on bond issuance.
“There’s some significant savings that can be realized to prefund part of 2011 new-money needs for capital,” McCoy said. “We’re obviously watching the market very closely and would not execute the transaction if we couldn’t secure the savings that I’ve just discussed.”
The finance committee approved the debt issuance, which is subject to approval by the full board on Wednesday.
