Moody’s, S&P affirm Sound Transit’s financial management with highest-possible bond ratings
Other entities are seeing downgraded ratings due to tough economy and new Moody's methodology
The nation's major bond credit rating agencies issued decisions yesterday and today affirming Sound Transit's financial management by maintaining the highest ratings possible despite the challenging economic environment.
The ratings will translate to significant savings for regional taxpayers. They come as Sound Transit prepares to save a minimum of $12 million by taking advantage of lower interest rates in refinancing approximately $350 million of its currently outstanding bonds. The Sound Transit Board today unanimously approved motions establishing parameters for moving forward with the transactions.
Moody's Investor Service yesterday continued its "Aa1" ratings for Sound Transit's senior bonds - the highest possible for tax-backed bonds - while maintaining its previous "Aa2" rating for the agency's junior "parity bond" obligations. This action maintains Sound Transit as one of the highest-rated transit agencies in the nation. Recently, Moody's adopted a new methodology for rating special tax credits such as Sound Transit. This new approach is based on a weighted average scoring system and is intended to make the bond rating process more transparent. Sound Transit's resilience under the new rating criterion falls in contrast to several other transit agencies that have seen their ratings slip into lower categories.
Sound Transit also carries credit ratings from Standard & Poor's (S&P), which today confirmed its outstanding ratings on Sound Transit's bonds. S&P has assigned its highest possible rating category of "AAA" to both the agency's senior and junior bond obligations.
"These ratings represent an important affirmation of our financial management in a tough environment where many organizations are facing credit downgrades due to lost tax revenues and financial instability," said Sound Transit Chief Financial Officer Brian McCartan. "We are proud to have maintained our ratings and will stay focused on stretching the reach of our taxpayers' investments in mass transit."
Since 2009 Sound Transit has moved mass transit expansions forward despite what is now projected to be a 25 percent reduction in revenues for the Sound Transit 2 capital program that voters approved in 2008. Out of the 36 miles of light rail extensions that were the centerpiece of the measure, the agency is currently on track to deliver all but two miles within the ballot measure's 2023 timeline and is continuing to work on solutions.
The agency's approaches for managing the recession's impacts have included maintaining an aggressive focus on controlling costs, putting some projects on hold, and earlier decisions to include prudent financial contingencies in project cost estimates.