The finance director of New York's Metropolitan Transportation Authority expects to roll out a new credit secured by payroll mobility tax revenues that will be its highest rated.
"We've had preliminary discussions with rating agencies," Patrick McCoy told MTA finance committee members Monday in midtown Manhattan. "At some point they'll come back with a formal rating, but were not at this point yet.
"We expect this to be our highest rated credit in the transit and commuter specialty."
McCoy added that $7 billion of issuance from 2014 through 2017 — the period of the rolling four-year financial plan — could cost the new credit about $30 million less annually in debt service than that of transportation revenue bonds, its primary credit.
Moody's rates the transportation revenue bonds A2. Standard & Poor's and Fitch Ratings assign A-plus and A ratings, respectively.
New York State five years ago, as part of a financing package to bail out the MTA, approved a 34-cent tax for every $100 of payroll in communities within its region on private and public sector employers within the MTA's coverage area. Large employers pay the tax concurrently with regular periodic payroll, while sole proprietors and other smaller employers pay it quarterly.
The authority has withstood several legal challenges to the law from Long Island and upstate counties. Last year the New York State Court of Appeals upheld the law as constitutional. Moody's Investors Service called the court victory a credit positive for the MTA.
The MTA as of March 7 has $33.4 billion of debt outstanding. Transportation revenue bonds account for about 58% of MTA debt. Dedicated tax fund and Triborough Bridge and Tunnel Authority bonds total 21% and 15%, respectively.
Roughly 85% of MTA bonds are fixed-rate, the rest split between variable rate and synthetic fixed rate, according to the authority's April 2 presentation at the JPMorgan public finance transportation and utility conference, also in New York.
"Most recently we've been relying on the transportation revenue credit," McCoy said Monday. "We'll continue to have that available, and also our dedicated tax fund credit."
TBTA bonds fund bridge and tunnel projects. The MTA operates the New York City subway system, Metro-North and Long Island railroads, and seven bridges and two tunnels that connect New York City boroughs.
The state comptroller's office holds the PMT revenues in a dedicated trust account, though some board members Monday noted that the state in recent years has siphoned MTA lockbox money to replenish its general fund.
Board member Mark Page said the MTA still needs more revenue.
"In the scheme of things, this doesn't really change the equation of our need of support for the capital plan," said Page, a former executive director of the New York City Transitional Finance Authority. "This gives us a way of using our existing revenue base, but does not give us incremental access to more dollars and cents."
According to McCoy, the new credit, which the MTA's capital program review board and the full board must still approve, would involve a senior and subordinate liens revenue pledge, featuring PMT tax revenues, a PMT revenue offset and aid trust account revenues.
The aid trust account, also established in 2009, is funded by supplemental motor vehicle license and registration fees, a supplemental car rental fee and a 50-cent charge on taxi rides with the MTA's district. Proceeds could fund TBTA debt or operating expenses.
The monthly debt service set-aside would be one-fifth interest and one-tenth principal. The additional bonds test would be 2.5 times senior maximum annual debt service and 1.75 times aggregate minimum annual debt service.
The resolution would authorize bonds solely for approved capital program transit and commuter projects, according to McCoy.
