San Diego Trolley Federal Grant Is a Credit Positive

san-diego-trolley-credit-sdmts-357.jpg

LOS ANGELES — A $1 billion federal grant is a credit positive for the San Diego Metropolitan Transit System, Moody's Investors Service said in a report.

The U.S. Federal Transit Administration's recently announced the 10-year, $1 billion grant to extend light rail service in San Diego.

The grant will fund about half of the $2.2 billion needed for the 11-mile extension of the MTS blue line. The remaining $1.1 billion will be paid by an existing local half-cent sales tax, which may be supplemented by a Transportation Infrastructure Finance and Innovation Act loan secured by the sales tax.

San Diego is experiencing above-average population growth and the new federal funds will allow its transit system to convert future growth into increased ridership and the fare revenues secure its bonds, Moody's analysts said.

San Diego will receive an initial $125 million for the project in federal fiscal 2017, which begins October 1. Local sales tax revenues will cover the remaining $17 million in anticipated annual expenses, Moody's said.

The 30-mile trolley line will connect the rapidly expanding University City area north of downtown San Diego to residential communities in the south. Trolley ridership is expected to grow by 11 million by 2035, a 27.5% increase from 40 million in 2015.

"The increase in total system ridership will enhance MTS' position as the monopoly provider of transit service in San Diego, increasing its essentiality, which is a significant credit factor given MTS' need for public subsidies," according to Moody's report.

For reprint and licensing requests for this article, click here.
Transportation industry California
MORE FROM BOND BUYER