The $996 million federal grant Massachusetts received to extend a Boston-area Green Line streetcar route is a credit positive, according to Moody's Investors Service.
Last week, former Gov. Deval Patrick announced the grant from the U.S. Department of Transportation, which will enable the Massachusetts Bay Transportation Authority to lengthen the Green Line from Lechmere Square in East Cambridge to heavily populated Somerville and Medford, north of Boston.
The grant "relieves pressure on the MBTA and the Commonwealth of Massachusetts to issue additional debt to finance the $2 billion project," Moody's said in a commentary. The grant constitutes 16% of the MBTA's five-year capital investment program as the agency looks to complete the Green Line build-out by 2020.
The MBTA and its Massachusetts Department of Transportation overseer must complete the project as part of the Central Artery/Tunnel Project, known commonly as the "Big Dig."
The authority in September opened Assembly station in Somerville along the Orange Line.
The MBTA will also purchase 24 light-rail cars and create a bicycle and pedestrian path along a portion of the route. The authority expects the Green Line to carry 38,000 passengers per day when completed in 2020.
The MBTA has $3.8 billion of debt outstanding secured by 1% of the 6.25% statewide sales tax, subject to a guaranteed "floor," or minimum amount of revenue from the state. Debt service coverage is 2.7 times and Moody's estimates that an additional $1 billion of sales-tax supported debt would reduce coverage to 2.1 times.