Natural variable-rate debt represents 8% of the total debt of New York’s Metropolitan Transportation Authority — well under its limit, an MTA finance official said Monday
Speaking to the board of directors finance committee, finance manager Patrick McCoy said the authority is carrying $2.6 billion of such debt, plus $2.7 billion of synthetic fixed-rate debt and $510 million of term-rate debt. Synthetic fixed-rate debt has a variable-rate component — the bond — but the swap effectively converts that variability to a fixed component of the authority’s overall portfolio.
The MTA has roughly $31.7 billion of debt outstanding overall.
“We have a very prudent level of exposure,” said McCoy. The MTA’s policy limits variable-rate debt to 25% of the aggregate principal amount of all outstanding obligations.
According to McCoy’s presentation, $25.6 billion, or 82%, of the authority’s debt is fixed-rate as of March 31.
“We’re fairly well diversified,” McCoy said of the variable-rate debt within the MTA’s debt portfolio. It includes $2.9 billion in variable rate demand bonds, $1 billion in floating-rate notes, $900 million in commercial paper, $310 million in auction-rate securities and a $200 million private placement.
“It was another attractive year for variable-rate debt,” said McCoy.
McCoy said bond rating agencies do not reveal what ratio of variable to overall debt is desirable. “The rating agencies do not provide much clarity or guidance,” he said. “They’ll say it’s unique to every issuer.”
“Well, who rates the rating agencies?” asked board member Charles Moerdler.
McCoy, laughing: “Good question.”
Moody’s Investors Service rates the MTA’s transportation revenue bonds A2, while Fitch Ratings and Standard & Poor’s assign A ratings.
Monday’s six committee meetings and the full board on Wednesday mark the first set for Thomas Prendergast after Gov. Andrew Cuomo appointed him chairman and chief executive, subject to state Senate approval. Carmen Bianco will assume Prendergast’s former position, the presidency of New York City Transit, in an interim role while the authority conducts a nationwide search. Bianco had served as the agency’s senior vice president of subways the last three years and has 30 years of management experience in mass transit and railroad operations.
The board’s bridges and tunnels committee tabled a motion by Allen Cappelli to dedicate a $40 million funding increase from New York State to fully restoring service cuts made in 2010. The MTA received $358 million from Albany, or 9.2% higher than expected.
“I understand there are still troubles in the economy, but there are positive indicators,” said Cappelli, who represents New York City’s Staten Island borough.
The MTA will introduce its new fiscal budget and four-year financial plan in July. The authority restored some of the service last year.
Interim board chairman Fernando Ferrer warned against restoring cuts too soon, only to have them reversed. He recalled that happening when he was Bronx borough president. “I never want to see this board have to do that again,” he said.
Prendergast said the process is fluid. “We’re constantly looking at where we need to change service, whether it’s an addition or a restoration.”