Sound Transit receives upgrade in credit rating
Sound Transit's stellar credit rating got stronger today as one of the nation’s two major independent municipal bond rating agencies upgraded its bond rating.
The improved rating, from Moody's Investors Service, is good news for the Puget Sound region’s taxpayers and signals Sound Transit's strong financial health. Specifically, it will lower Sound Transit’s cost of borrowing money, enabling the public’s investment in regional transit projects and services to stretch further.
Moody's upgraded Sound Transit's senior lien bond rating from Aa3 to Aa2, their third highest credit rating.
"Our continued hard work to manage projects effectively and stay on schedule and on budget is really paying off," said Sound Transit Board Chair and Pierce County Executive John Ladenburg. "This latest upgrade offers more proof that Sound Transit is continuing down a strong financial path. This sends another signal that the taxpayers can be confident in Sound Transit's ability to maintain high standards of financial management as we deliver projects and services that help people move around the region."
The Moody's report states that the upgrade is based on "historically strong financial operations, fast-growing ridership on all transit modes, and the authority's importance to the strong service area that includes the state's most populous counties." The report was in connection with an upcoming bond issue for the current Sound Move program.
Moody's conducts ratings on over 170,000 corporate, government, and structured finance securities from around the world.
Standard & Poor's, the nation’s other major rating firm, has already granted Sound Transit’s senior lien bonds their AAA rating, the highest possible.
The firms look closely at Sound Transit’s financial management policies, revenues and reserves. The top ratings mean that Sound Transit bonds are a very reliable choice when investors buy the bonds that help finance most public infrastructure projects.
Sound Transit's bond ratings have continually improved since the voter's approved the Sound Move program in 1996. Sound Transit has applied lessons learned over the past decade to the development of the Sound Transit 2 plan that is part of the Roads & Transit ballot measure that regional voters will consider on Nov. 6. Last month, the independent Expert Review Panel appointed by the State of Washington issued a final letter affirming the thoroughness of the agency’s Sound Transit 2 work, including its estimates of project costs.
The Sound Transit 2 financial plan anticipates paying cash for 60 percent of the proposed investments and selling bonds to cover the remaining 40 percent. Bonds sales would be about $3.9 billion out of the plan’s capital costs of $10.8 billion in 2006 dollars. This compares to buying a house with a down payment of around 60 percent, when most homeowners sign mortgages with down payments of 0 to 20 percent.
As a result of Sound Transit’s strong bond rating, the amount of interest Sound Transit would pay for debt service on future borrowing will be lower than most public agencies in the region. Sound Transit borrows money at very competitive interest rates and uses 30-year bonds with terms similar to those used by other public agencies. For Sound Transit 2, the agency would issue 30-year bonds incrementally over the 20-year period for delivering the projects, paying off the last bonds, issued as late as 2027, by 2057.
The 40 percent of the Sound Transit 2 projects that would be paid for by bonds is relatively conservative. In comparison, the Seattle Monorail Project would have issued bonds totaling more than 100 percent of its capital costs. Sound Transit would pay interest of about $1.20 for every dollar borrowed for Sound Transit 2, a very competitive rate. The monorail project would have paid an estimated $4.70 in interest for every dollar borrowed.
If approved in November, the Roads and Transit package would build more than 50 miles of light rail extensions north to Lynnwood, east to Bellevue and Redmond, and south from SeaTac Airport to Tacoma, as well as improve commuter rail facilities and expand express bus service. These investments would expand Sound Transit’s daily ridership to more than 350,000 by 2030.
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Sound Transit’s regional network of express buses, commuter rail, light rail and transit facilities connects communities in King, Pierce and Snohomish counties.