Sound Transit refunds debt for ~$23 million in savings

The Sound Transit Board has approved refunding $205 million in 2016 bonds backed by sales taxes and motor vehicle excise taxes for a more favorable interest rate on the debt. The move decreases debt service costs by about $23 million in today’s dollars.

As part of the debt refunding process, Sound Transit requested that the credit rating agencies rate the new issuance of debt along with current outstanding debt. Those agencies graded Sound Transit at levels that will ensure the lowest possible borrowing costs for future debt issuance.

Specifically, those agencies found:

• S&P affirmed its current ratings for outstanding debt (AAA/AA+) and assigned an AAA rating for the new issuance.
• Fitch assigned a AAA rating for the new issuance and upgraded all their other ratings on current debt to AAA.
• Moody’s rated the new issuance Aa1 and affirmed the rating on the prior lien at Aaa.

"Today’s action and the related outstanding marks we received from the credit rating agencies demonstrate Sound Transit’s responsible stewardship of taxpayer resources," said Sound Transit Board Chair and Snohomish County Executive Dave Somers. “Over the long term, our industry-leading credit rating is saving millions in interest costs.”

“This is the type of proactive and responsible work that will meaningfully support a positive financial outlook for the agency,” said Sound Transit Finance and Audit Committee Chair and Tukwila Mayor Thomas McLeod. “This action bolsters the agency’s track record of successfully refinancing debt during favorable market conditions.”

“As a public agency, we are constantly looking for ways to optimize our debt to save money and maximize value for the communities we serve,” said Sound Transit CEO Dow Constantine. “It is exactly this type of proactive management of our borrowing strategy that will position us to successfully deliver every project in the ST3 program.”

Sound Transit issues both fixed and variable rate bonds with the goal of minimizing net interest payments over time. Agency staff thoroughly evaluates all options before any financing transaction to ensure it meets Sound Transit’s goals.