MARTA saves millions by paying off a debt incurred partly to fund bus rapid transit

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.

marta bus

MARTA saved $41.6 million by selling a bond to pay off a $250 million debt that had a higher interest rate. Cile/Credit: Kelly Jordan

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.

marta, expansion

MARTA is currently evaluating six corridors for their potential to be served by a bus that travels in a dedicated lane or a light rail system. Credit: MARTA

“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.”

Campbellton Road is one of six corridors that MARTA is evaluating to determine if the corridor would be better served by a high capacity transit mode, such as light rail or buses that travel in a dedicated lane. Credit: David Pendered

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.

David Pendered, Managing Editor, is an Atlanta journalist with more than 30 years experience reporting on the region’s urban affairs, from Atlanta City Hall to the state Capitol. Since 2008, he has written for print and digital publications, and advised on media and governmental affairs. Previously, he spent more than 26 years with The Atlanta Journal-Constitution and won awards for his coverage of schools and urban development. David graduated from North Carolina State University and was a Western Knight Center Fellow. David was born in Pennsylvania, grew up in North Carolina and is married to a fifth-generation Atlantan.

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