TEXT-Fitch rates Metropolitan Transportation Authority revs 'A'
Sept 28 - Fitch Ratings has assigned an underlying 'A' rating to the Metropolitan Transportation Authority, New York's (MTA) $75 million transportation revenue variable rate bonds, series 2005E-3 and assigns an 'A' rating to approximately $250 million of bank bonds corresponding to transportation revenue variable rate bonds, series 2005E, consisting of $100 million of subseries 2005E-1, $75 million of subseries 2005E-2 and $75 million of subseries 2005E-3. Fitch also affirms the 'A' rating on the MTA's approximately $16.8 billion in outstanding MTA transportation revenue bonds. The Rating Outlook is Stable. Fitch will be assigning credit enhanced ratings to the series 2005E bonds. KEY RATING DRIVERS: --Strategic Importance: The MTA transportation network is essential to the economy of the New York region, with New York City Transit carrying an average of 7.1 million daily subway and bus riders and another 590,000 daily commuter rail passengers. And, while an independent authority, the MTA has received significant support from the State of New York in the form of additional tax sources aimed at closing projected operating budget gaps and addressing capital needs. --Highly Constrained Financial Operations: Despite high debt service coverage ratios, the MTA's financial position is constrained given its extremely large operating profile and high fixed costs, including significant retiree pension benefits. In addition, the MTA's operating subsidies are vulnerable to economic conditions. However, while politically unpopular, the authority is required to offset revenue declines to cover operations through service reductions and fare increases. --Strong Security Pledge: The bonds are secured by a gross lien on a diverse stream of pledged revenues. --Extremely Large Capital Needs: The MTA anticipates issuing a total of $10.5 billion in debt to fund the $22.2 billion 2010 - 2014 MTA Capital Program, some of which has already been issued. The MTA has the constant challenge of delicately balancing the large rehabilitation and expansion needs of the system while covering operating expenses and maintaining financial flexibility. --Growing Annual Debt Burden: The MTA's capacity to continue to leverage resources to fund expansion projects while meeting renewal and replacement needs may be limited in the future if projected financial performance does not come to fruition. WHAT COULD TRIGGER A RATING ACTION: --An unfavorable outcome of the MTA's pending appeal of a recent NY Supreme Court ruling that deemed the payroll mobility tax (PMT) unconstitutional. --Inability to achieve operating efficiencies and implement other key elements of the cost reduction initiatives and/or maintain an ongoing state of good repair and other elements of the capital program. --Significant cost overruns or delays in the capital program's mega-projects that lead to additional borrowing. --Additional service cuts or deferral of core capital projects that result in deterioration of key transportation services. --Deterioration or limited growth in dedicated tax subsidies. SECURITY: The transportation revenue bonds are primarily secured by a gross lien on the MTA's operating receipts and subsidies, including: transit and commuter rail fares and other operating revenues, surplus toll revenues, and certain dedicated tax sources, state and local operating subsidies, and reimbursements. TRANSACTION SUMMARY:Tax-Supported Rating Criteria