Sound Transit bond issue a "sell out" after receiving high ratings
They may not be the equivalent of a Garth Brooks concert, or an appearance by Smashing Pumpkins or Pearl Jam, but Sound Transit bonds have proven to be a quick "sell-out" on Wall Street. Sound Transit - the Central Puget Sound Regional Transit Authority - entered the bond market this week, prepared to issue up to $300 million in bonds, backed by local sales and motor vehicle taxes. The agency's bonds were quickly oversubscribed so that $350 million in bonds were issued carrying an average interest rate of 4.97 percent - more than one full percentage point below the anticipated rate of six percent.
The bond issuance was bolstered last week when Standard & Poors Corp. awarded the transit agency's bonds an "AA "rating, and Moody's Investor Services gave an "A1 rating, carrying a positive outlook," meaning they anticipate a possible upgrade to "AA" for future bond issues.
In announcing its rating, Moody's said the solid approval of 57 percent of the region's voters for local taxes to support regional transit, including majority votes in the areas of all three counties within the transit district, was a key reason for the high rating. Their announcement stated that, "In Moody's opinion, the plan's success in each of the counties reflects both political realities of infrastructure investment, as well as Sound Transit's evident capability to navigate difficult political waters. . . . The positive outlook reflects, in part, Moody's confidence that Sound Transit will successfully implement the projects before it."
According to the chair of the Sound Transit Board, Paul Miller, a Tacoma City Councilmember, these ratings and the subsequent successful bond issuance demonstrate a high level of confidence in Sound Transit as a good investment. "We're in a great position in that we entered the bond market at a point when interest rates are among the lowest in thirty years, armed with some of the highest bond ratings ever received by a public transit agency," Miller said. "Best of all, the result is lower interest rates on the debt service which translates into significant savings for the taxpayers of the region."
The chair of Sound Transit's Finance Committee, King Co. Councilmember Greg Nickels, said the ratings are further acknowledgement of the Puget Sound region's willingness to take the initiative to address its growing transportation problem. "The citizens of our region voted to tax themselves to provide new alternatives to our roadway gridlock, and their initiative is paying off for this project in Washington D.C., and now on Wall Street," Nickels said.
The regional transit plan, Sound Move, approved by the region's voters in 1996 authorized the issuance of approximately $1.1 billion (1995$) as part of the financing for the ten-year program. Sound Transit first bond issuance was priced and sold on Dec. 9 for a total of $350 million.
The agency is on track for implementing its comprehensive package of transit improvements for the Central Puget Sound region which includes 25 miles of new light rail service, an 82-mile commuter rail line on existing railroad tracks, 17 new limited-stop regional express bus routes and a number of new transit connections and improvements.
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Sound Transit plans, builds and operates regional transit systems and services to improve mobility for Central Puget Sound.