The Massachusetts Bay Transportation Authority is set to price nearly $1 billion of bonds next week, its second sale this year.
"We're looking to finance $650 million of our capital plan and replenish $290 million of our commercial paper capacity," MBTA Treasurer Patrick Landers said in a statement. "Interest from investors for our senior sales tax lien is significant, and we hope financing in the summer when both overall municipal redemptions and the MBTA's own redemptions of principal and interest payments due July 1st will help us continue to achieve strong results."
The $939 million negotiated deal, supported by sales tax revenue, is set to price on July 1, with Barclays as lead manager and 15 co-managers. PRAG serves as municipal advisor with Mintz as counsel.
Landers said the MBTA "refreshed [its] underwriting pools" prior to the sale "to select a syndicate best able to place this larger issuance in a volatile market."
The bonds carry maturities from 2029 to 2055, with an optional call provision in 2035. The bonds are rated AAA by Fitch Ratings and KBRA and AA-plus by S&P Global Ratings.
The proceeds will be used toward financing the MBTA's capital improvement plan. The investor presentation suggested the bonds will fund projects including automatic train controls, the purchase of railcars and coaches and implementing a contactless payment system.
The MBTA has long experienced budget troubles and has been
The agency's board approved a
Earlier this month, the MBTA's board approved a $3.24 billion operating budget for fiscal 2026. That budget assumed the state budget would provide at least $969 million of funds from the "fair share" surtax. Even with that state assistance, the budget would spend $86 million of the agency's dwindling reserves.
But in state budget negotiations, the legislature has proven unwilling to meet that target. The
The other source of state funding, the Commonwealth Transportation Fund, also serves as a matter of contention. Gov. Maura Healey and the House of Representatives both proposed transferring $687 million from the fund to the MBTA, but the state Senate proposed giving just $500 million.
Meanwhile, Bloomberg News reported the agency could be running at a
The MBTA's bonds, however, are insulated from these funding problems. The sales tax revenue is not subject to allocation from the legislature and is kept in a lockbox separate from the rest of the agency's finances, S&P analyst Ladunni Okolo said.
Additionally, the bonds have two pledges, making the revenue more reliable than just Massachusetts' sales tax receipts.
The first pledge is a 1% statewide sales tax, plus $160 million annually, according to the deal's investor presentation. The second is a "base revenue amount" allocated by the state, which is adjusted annually for inflation.
The MBTA receives whichever amount is higher in a given year.
"The second pledge is really the state pledging that they send those amounts to MBTA, regardless of the performance of sales tax that year," Okolo said.
Since fiscal year 2018, the sales tax revenue has always exceeded the base revenue amount. Prior to that year, the base revenue was usually higher, according to the presentation.
Tax receipts for fiscal year 2026 are projected to be $1.425 billion, which would exceed the projected base revenue amount by $192 million, the investor presentation said.
The MBTA has $4.2 billion of sales tax revenue bonds outstanding.
Last year, the agency
Rates for that deal ranged from 3.25% in 2025 to 3.98% in 2052. The sustainable tranche saw 5s of 2054 at 4%.
The MBTA last issued bonds late last month, with a $94 million competitive deal won by Jefferies at 109.8739 with a TIC of 4.0477%. Landers said the deal saw "historically tight credit spreads" and received 16 unique bids. Those bonds, 5s maturing between 2033 and 2045 yielded from 3.10% to 4.36%, refunded bonds from 2015 and 2024.
Although the bonds aren't subject to the MBTA's financial problems, they are subject to Massachusetts' financial problems, Okolo said. S&P's rating report noted "the commonwealth's coastal exposure to rising sea levels" and its high liabilities burden from pensions and debt.
In Fitch's view, the sales tax revenue is a stronger credit than Massachusetts' overall, according to analyst Douglas Offerman.
"The sales tax revenues are segregated from other state resources, but they also pay bondholders before they are available for other uses by the MBTA," Offerman said. "That feature is ... what enables us to rate them a notch higher than Massachusetts itself."
The agency has one other source of revenue for its debt: a portion of state aid to 178 cities and towns in its service area. The MBTA last brought those bonds to market in 2022 with a $295 million deal.
