Better transparency, among other benefits, drives New York Metropolitan Transportation Authority's aggressive strategy of bond anticipation note issuance, said one official.
"We can see where the proceeds went and it helps with being able to better match the assets and the debt liability by seeing if it's a 40-year asset," assistant finance director Marcia Tannian told members of the MTA board's finance committee on Monday.
The authority, one of the largest municipal issuers, had $35.9 billion of outstanding debt at an all-in true interest cost of 3.69% as of Dec. 31, Tannian said in her
When retiring BANs, the MTA reviews projects financed with the notes, and seeks to issue longer-term debt for the specified assets with longer useful lives, said Tannian, thus providing a better match of those who benefit from the asset and those who pay for it.
The low-cost, short-term financing using a competitive sale method is attractive, she added.
For example, said Tannian, in the Triborough Bridge and Tunnel Authority's $500 million Series 2015A sale in June, the assets funded by BAN proceeds had an average useful life of more than 40 years, so TBTA was better able to retain an asset-liability match by issuing a 35-year bond with a more level debt structure to retire the BANs.
The MTA also issued a $500 million BAN in September under its dedicated tax fund credit and $700 million last month under its workhorse credit, transportation revenue bonds. The latter transaction included $72 million in taxable bonds.
"One of the other benefits of that transparency is we can track private use for better compliance with the tax-exempt requirements, and as we get into green bonds, we'll be better able to track and report for the green bonds, which will have its own reporting requirement," said Tannian.
"All in all, issuing BANs provides better transparency that just issuing bonds doesn't do."
The MTA is considering a green, or environmental, designation for an upcoming $500 million issuance of Series 2016 transportation revenue refunding bonds that would pay off the outstanding Series 2015A notes. The all-minority and women business enterprise and service-disabled team leading the transaction will include Ramirez & Co. as senior bookrunner, with Stern Brothers & Co. and Drexel Hamilton LLC as special co-senior managers.
Authority finance officials are working on certification with the London-based nonprofit Climate Bonds Initiative, which develops global standards for green bond issuance.
"I hope we're aggressive on that, because so much of what we do is green-related as a public transit agency," said board member Jonathan Ballan.
