Standard & Poor’s has downgraded the credit rating for the New York Metropolitan Transportation Authority to A. It was two grades higher than that just five months ago. If it falls five more grades, it will be in junk bond territory.
S&P says that it based the downgrade on its assessment of MTA’s preliminary 2019 budget, which calls for spending $32.5 billion on rehabilitation efforts. Although $10 billion of that would come from bond sales, S&P says that MTA lacks the revenues to repay such bonds. If someone doesn’t find a new source of revenues, S&P warns, it will downgrade the agency’s credit rating still further. Lower credit ratings will mean that MTA will have to pay higher interest rates on future debt.
At the end of 2017, MTA’s long-term debt was $38.3 billion, most of which was incurred to address the last maintenance crisis. Since 2017 it has issued about half a billion dollars worth of additional bonds. This doesn’t count another $20 billion in unfunded health-care obligations. Add in $10 billion in planned bond issues for repair and the agency will owe nearly $70 billion. That’s a lot for a system that earns less than $7 billion in annual revenues and spends roughly twice that on operations. Continue reading
