A $967.1 million federal loan to New York's Metropolitan Transportation Authority represents "a very favorable position for the MTA," its finance manager told the authority's finance committee.
The MTA board's on Wednesday will consider the Federal Railroad Administration loan for co-called positive train control signal system safety improvements to Long Island and Metro-North commuter railroads, two days after the finance panel signed off on it.
"Board approval is an important step," said finance manager Patrick McCoy, who said MTA and federal officials hope to complete the transaction in early May. "All parties are working to achieve this goal," McCoy said.
The loan, under the Railroad Rehabilitation and Improvement Financing program, or RRIF, will enable the MTA to comply with a 2008 congressional mandate to install positive train control on all commuter railroad main-line tracks.
The technology, which enables computerized systems to automatically control certain aspects of train movement, is intended to prevent collisions such as the Dec. 1, 2013, Metro-North crash near Spuyten Duyvil station in the Bronx that killed four people and injured dozens.
"It's a congressionally required technology. It is an unfunded mandate in that there are no specific funds earmarked for this technology," said McCoy.
The MTA will issue its transportation revenue bond directly to the FRA and will repay the obligation over 22½ years at a fixed interest rate of 2.38%, with the first payment due in 2018. The FRA may assign its rights as a bondholder to an additional holder.
Standard & Poor's rates the MTA's transportation revenue bonds AA-minus, while Moody's Investors Service and Fitch Ratings rate them A2 and A, respectively.
"We've consistently been in the A category on the transportation revenue credit," McCoy told the finance committee. "All of our ratings are currently stable, which means we expect them to stay where they are."
In addition, the MTA could pay off the debt early without cost, should it receive grant money for the technology. U.S. Sens. Chuck Schumer and Kirsten Gillibrand, both New York Democrats, co-filed a bill to provide funding for the PTC changes.
"The attractive thing about this loan is that we draw the funds down only as we need to spend the money, so if there were to be a grant available, we could stop the loan at any time," said chief financial officer Robert Foran. "That's what's nice about this. We're not just selling bonds and then we're stuck with it. If free money came along, we'd be in line."
The FRA also told MTA finance officials that there will be no credit risk premium in connection with the transportation revenue bond credit as principal security with the loan.
In 2011 the authority originally applied for $3 billion of RRIF funding for the East Side access project, but nearly three years later adjusted the request to seek $967 million for positive train control installation. MTA officials say no RRIF loan for East Side access is now on the table.
Board member and New York City transportation Commissioner Polly Trottenberg said she understood how positive train control became an unfunded mandate, but worried about a lack of revenue stream normally connected with a RRIF loan.
"I'll just confess some anxiety here," said Trottenberg, a former undersecretary at the U.S. Department of Transportation.
"To be clear, we're borrowing a lot of money now that will be paid back over a couple of generations for something that's not a revenue-generating activity. It's just adding to the MTA's debt load pretty significantly."
