TEXT-Fitch rates Metropolitan Transportation Authority revs 'A'

Fri Sep 28, 2012 2:15pm EDT

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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
FILED UNDER:
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