DALLAS — After successfully pricing $825 million of revenue bonds Monday to expand its light-rail system, the Dallas Area Rapid Transit board turned its attention Tuesday to a $1.26 billion budget requiring job cuts and service reductions.
The reductions are a response to slumping system revenues and include cutbacks in train service and elimination of 150 jobs.
New sources of funding include parking fees at light-rail stations and tolling of future carpool lanes.
The $1.26 billion budget plan approved Tuesday goes into effect Friday, the beginning of DART’s fiscal year.
“We think we’re bottoming out with the economy,” said chief financial officer Dave Leininger. “For the next two years, we’re well positioned.”
The DART bond deal, led by senior manager Bank of America Merrill Lynch, included $729 million of taxable Build America Bonds and $95.6 million of tax-exempt revenue refunding bonds.
The pricing produced yields of 4.922% and a spread of 120 basis points over comparable Treasuries on BABs maturing in 2041. BABs maturing in 2048 came with yields of 5.022% or 130 basis points over Treasuries.
Factoring in the direct-pay federal subsidy, the interest cost on the BABs was equivalent to 3.27%, Leininger said.
“We’re really delighted with how the pricing went,” he said. “We saw real strong institutional interest. Retail was a little softer, but the rate was so low that was not surprising.”
Institutional interest was so strong that the underwriters decided to reverse the expected order of pricing, moving the retail order period to Tuesday and making Monday the institutional pricing.
“We got very strong signals from the buy side on Monday and decided to switch the order,” Leininger said. “We took orders of $255 million and $100 million from two institutions.”
The bonds contain a make-whole call at Treasuries plus 20 basis points.
The Municipal Market Data triple-A scale yielded 2.32% in 10 years Monday, while the 20-year scale held at its record low of 3.28%.
On the refunding, DART achieved net present-value savings of at least 7%, Leininger said.
The bonds mature from 2013 to 2023. On the long end, 5% coupons produced yields of 3.020%.
The proceeds of the bond sale will finance completion of two major light-rail lines, Leininger said. With sales tax revenues weakening, DART has scaled back its 20-year capital plan.
The agency saw its AAA rating from Standard & Poor’s fall to AA-plus on Sept. 17, while Moody’s Investors Service maintained its Aa2.