The Massachusetts Bay Transportation Authority is considering leveraging future parking revenues through a proposed nonprofit entity to generate up to $325 million and help pay down outstanding debt.
The state’s largest mass-transit provider would like to reduce its $5.5 billion of outstanding debt by selling the right to future revenue from its parking spaces in return for an upfront payment of $250 million to $325 million, according to MTBA chief financial officer Jon Davis.
Officials are considering forming a 501c3 entity that would sell tax-exempt bonds to finance the purchase price of the parking revenue. The nonprofit would then hand the bond proceeds to the authority in exchange for the right to receive its parking revenue.
The authority would continue to own the parking spaces and control parking fees.
“We would use that upfront payment to solely pay down MBTA debt,” Davis said. “And it would be looked at as part of the fiscal 2012 budget solution.”
Fiscal 2012 begins July 1 for the MTBA, which is facing a $127 million deficit in fiscal 2012. Officials are looking for additional non-fare revenue, spending cuts, and debt-service savings to help balance next year’s budget.
Current debt-service expenses for fiscal 2012 are $448.2 million, according to Davis.
The agency generates $30 million to $35 million of net-parking revenue annually from 46,000 parking spaces it owns and the 5,000 other parking spots it jointly manages with towns and other authorities, Davis said. Any excess parking revenue after debt-service costs are met would flow back into the authority’s coffers.
Creating a nonprofit to issue the bonds would allow the authority to avoid adding debt to its book. The MBTA could opt to issue parking-revenue bonds itself.
“That’s an item that would be considered as part of the structuring,” Davis said. “We would take a look at whether or not we would do a special-purpose entity or would we do it under the MBTA’s credit or a new MBTA credit? I think that’s all in the implementation stage.”
The authority used a similar financing structure with a nonprofit entity before. In the 1990s, it created a 501c3 to help finance the construction of its Route 128 garage, which serves MBTA customers and users of Amtrak’s Northeast Corridor line. The nonprofit sold tax-exempt bonds that were secured by future parking revenue from the facility.
Separately, the Massachusetts Department of Transportation, which oversees most surface transportation entities in the state, plans to refinance $109 million of Western Turnpike debt in late February that was sold under the former Massachusetts Turnpike Authority. Officials estimate the transaction will generate $1.5 million of savings per year through 2017 or 2018,.
Bank of America Merrill Lynch is senior manager on the deal. MassDOT’s board is set to vote on the transaction next month.