Mass. treasury raising $326M for transportation projects
David Horree
The Providence & Worcester Railroad Company is pictured running freight along tracks in the region. The state is raising money to partially fund rail improvements.
Massachusetts Treasury officials are taking retail orders Wednesday on $326 million in bonds to fund bridge and rail projects.
The bonds are being issued to finance capital spending under the Accelerated Bridge and Rail Enhancement programs. Treasury officials also plan to issue $104 million in Commonwealth Transportation Fund revenue bonds to refund outstanding debt and $127 million of federal highway grant anticipation notes to fund projects under the Accelerated Bridge Program.
Moody's Investors Service has downgraded the Commonwealth Transportation Fund (CTF) Revenue Bond rating to Aa1 from Aaa and downgraded the outstanding ratings on the Commonwealth's Accelerated Bridge Program grant anticipation notes to Aa2 from Aa1. In a Sept. 15 opinion, Moody's said the CTF bonds "exhibit considerable credit strengths, including healthy debt service coverage levels even after factoring in additional future debt, and strong historical revenue performance."
The downgrade, Moody's said, "reflects an evolution in our thinking about when a special tax rating can pierce a general obligation (GO) rating. That relationship caps the CTF rating at the level of the GO. While the credit fundamentals have not changed, we note the ongoing need for annual appropriation of CTF debt service, and, the flow of pledged revenues through the commonwealth, via the Department of Revenue and Registry of Motor Vehicles, prior to being transferred to the trustee."
S&P Global Ratings assigned its AAA long-term rating, and stable outlook, to the CTF revenue bonds, which are backed by gas taxes and Registry of Motor Vehicles fees, but noted the new rail program represents a "significant expansion" of CTF bonding outside the Massachusetts Bay Transportation Authority's regular capital program" and in the long-term "could require substantial new capital funding beyond current authorizations." S&P said the series 2016A bond proceeds will help fund costs associated with the MBTA's Green Line Extension and associated stations.
According to investor slides accompanying the transaction, 261 structures have been replaced, renovated or preserved since the Accelerated Bridge Program began and the number of structurally deficient bridges in Massachusetts has been reduced from 543 in July 2008 to 432 as of July 1, 2016, a 20 percent reduction.
Investor slides identify the following seven major projects as targets for funding under this year's bonds: the Longfellow Bridge, the Kenneth F. Burns Memorial Bridge, the Fore River Bridge, the John Greenleaf Whittier Memorial Bridge, the State Route 79/I-195 Interchange in Fall River, the Woods Memorial Bridge, and the Millbury Bridge.
Authorized under a 2014 law, the rail enhancement program is intended to to provide financing for rail improvement projects outside the MBTA's regular capital program, including the following projects: Green Line Extension, the Knowledge Corridor, the Orange and Red Line, South Station improvements, the South Coast Rail extension and Fairmount Line improvements.
Following Wednesday's retail order period, the Treasury, working with Morgan Stanley as its senior manager, plans to launch an institutional order period and final pricing of the bonds on Thursday.
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