By David Pendered
MARTA expects to save a total of $41.6 million in future interest costs by refinancing $250 million in bonds that were sold in 2009. Part of the money was to have helped pay for a long-envisioned bus that would travel in a dedicated lane.
The 2009 bond package was sold at a time regional leaders contemplated a bus rapid transit system traveling along the Clifton Road Corridor, or east along I-20 from Downtown Atlanta. MARTA began lining up funding. The projects stalled.
Now, MARTA is planning for high-capacity transit lines in six corridors, including the original two plus the Campbellton Road corridor and others. Funding is to come partly from the 0.5 percent sales tax hike Atlanta voters approved last year.
MARTA’s leadership has been watching the market for a year and decided the time was ripe to sell another bond, at a lower interest rate, and use the proceeds to pay off the 2009 bond, MARTA said in a statement.
The interest rate on the new bond package is 3.4 percent, MARTA said. This is a steep reduction from an interest rate that reached 5.25 percent on a portion of the original bond package, according to terms of the original bond. The sale is expected to close Aug. 18, according to Moody’s Investors Service.
“This is a significant saving for the authority as we continue to strategically find ways to be good stewards of our financial resources,” MARTA GM/CEO Keith Parker said in a statement. “This type of bond refunding effort enables MARTA to do more and enhances our opportunities for strong bond ratings from Wall Street.”
Moody’s rated the bonds as Aa2 in a rating action released July 25. This is the third-highest rating on Moody’s scale and indicates analysts view the bonds as high quality and subject to low credit risk.
Analysts observed:
- “The Aa2 rating recognizes strong coverage of debt service by pledged tax revenues, an outperforming economic base, and a solid legal structure surrounding the collection of tax revenues and payment of debt service on the bonds….
- “The stable outlook reflects the positive trend in sales tax revenues and the ample coverage of debt service by pledged taxes.”
Terms of the 2009 bond show the $250 million was to be spent on items that could include, but not be limited to: bus replacement; rail car maintenance; a new bus route that would operate in a dedicated lane; train control systems upgrades; fire safety systems; track and struture renovation and rehabilitation.
Specifically, the money was to be in the following categories:
- Constrution/maintain a state of good repair: $216.7 million;
- Reserve fund: $25 million;
- Capitalized interest, through July 1, 2011: $22.2 million;
- Cost of issuance: $1.7 million.
According to bond terms, rates on the three bond packages ranged from:
- 4.25 percent on a $7.1 million package that matured July 1, 2034;
- 5.25 percent on a $56.8 million package that matured July 1, 2036;
- 5 percent on a $186 million package that matured July 1, 2039.
The bond team for the 2017 issuance included financial advisors at Hilltop Securities, First Tryon Advisors and TKG and Associates; and a legal team from Holland and Knight, Kutak-Rock and Townsend and Lockett LLC.
