Utah Transit Authority joins taxable refunding rush
The Utah Transit Authority, one of the Beehive State’s largest issuers, returns to the market this week with $511.5 million of debt, including more than $450 million of taxable refunding bonds.
Ahead of the deal, Fitch Ratings shifted the outlook on the authority to negative from stable. The shift “reflects a weakening in unrestricted cash and investments throughout a period of strong economic growth with spending growth outpacing revenue gains,” analyst Andrew Ward wrote.
The bonds are slated to price Wednesday in three tranches.
The tax-exempt Series A for $59.9 million, maturing in 2044, is a senior lien, with ratings of AA from S&P Global Ratings and Fitch, and Aa2 from Moody’s Investors Service.
A taxable Series B, maturing in 2042, will raise $303.6 million for refunding and will share the senior lien and the same ratings as Series A. Subordinate lien bonds of $148 million maturing in 2041 will also be taxable and refund previously issued debt. The bonds are rated A1 by Moody’s, A-plus by S&P, and AA by Fitch.
Proceeds of the new money bonds will cover projects such as the Depot District Maintenance Facility, the Ogden/Weber State University Bus Rapid Transit line, Northern Utah County double-tracking, and light rail traction power upgrades.
UTA’s bonds are backed by sales tax collected in the agency’s service area which consist of all or parts of six counties in the greater Salt Lake City area.
The authority provided commuter rail, light rail and bus service to 44.2 million passengers in 2018. The population in UTA’s boundaries is more than 2.5 million and represents about 79% of Utah’s population.
“Sales tax revenue growth has been strong with the exception of the recessionary period from fiscal 2008 through 2010,” wrote Moody's analyst Marcia Van Wagner.
The UTA deal is coming in one of the heaviest weeks of issuance so far this year. The muni market is expected to see $12.92 billion of new deals for the week, almost double the revised total of $6.58 billion in the past week.
UTA last issued $199 million of revenue bonds in March 2018.
The negotiated deal is led by Wells Fargo, with Bank of America Securities and J.P. Morgan as co-managers. Bob Kinney, managing director, and Julie Burger, director, are leading the deal for Wells Fargo.
Wells Fargo has been senior manager on the authority’s last three deals, including a $146 million issue in 2016.
Brian Baker, vice president of Zions Bank, is financial advisor, with the firm of Gilmore Bell as bond counsel.
Robert Biles, chief financial officer for UTA, is supervising the transaction, with closing scheduled Nov. 26.
Under its upcoming $490.1 million budget, UTA would dedicate nearly 28% of revenues toward its $2.1 billion of debt used to finance its TRAX and FrontRunner rail systems. Debt service of $135.5 million will be UTA’s largest expenditure, followed by bus service at $108.8 million.
More than 70% of UTA’s revenue comes from sales tax, with federal grants providing nearly 14%. Passenger fares are slightly more than 11% of revenue.
Salt Lake and Utah counties raised their sales taxes by a quarter cent last July, with some of the revenue going to UTA. Salt Lake City provided an extra $4 million for added bus service.