The finance committee of New York’s Metropolitan Transportation Authority on Monday approved the borrowing of up to $2.5 billion through the issuance of long-term bonds to cover Hurricane Sandy-related repair costs.
The approval is part of a $4.8 billion addition to the agency’s capital plan for 2010 to 2014, bringing the plan up to $29 billion. The MTA full board is scheduled to vote its approval on Wednesday.
Hilary Ring, the senior director for the MTA’s capital program, told the finance committee Monday that the agency expects to borrow up to $950 million to pay for damage not covered by insurance and federal government reimbursements. Ring added, however, that the MTA needs to expedite the work to precede the expected pace of reimbursements. “We have many damaged assets that need repair and replacement,” he said.
According to Ring, the MTA expects temporarily to fund the transit and commuter work through interim financing, including relying on available non-bond proceeds, and proceeds from bond anticipation notes.
“Bans could take on many forms. They could be fixed rate or variable rate. We would have the flexibility to negotiate with banks,” said finance manager Patrick McCoy. “We expect to take advantage of the short part of the yield curve, where the rates are the lowest.”
Chief financial officer Robert Foran said the damage estimate — the worst in the 108-year history of the MTA, which runs New York City’s subways, Long Island and Metro-North railroads, and several bridges and tunnels in the region — hinges on 75% reimbursement from the Federal Emergency Management Agency.
“It’s an estimate. It’s our best estimate at this point. It’s what we’ve embedded into our financial plan,” said Foran. “If FEMA reimburses us at 90%, it all would be lower.”
The Capital Program Review Board in Albany must approve the $4.8 billion increase in borrowing, except for $800 million of recovery projects in the bridges and tunnels capital plan.
Meanwhile, McCoy said that the MTA would reschedule the sale of its Triborough Bridge and Tunnel Authority’s senior and subordinate revenue bonds “on a day-to-day basis,” even putting off the sale until next year, if necessary.
Jefferies & Co. is lead manager of the negotiated sale of $550 million to $850 million of the bonds, originally scheduled for last week but postponed due to market conditions.
“The capital markets last week seemed to go into a stall. Last week was a heavy, heavy supply week,” McCoy said. While unable to identify a single catalyst, McCoy cited market uncertainty about the impending fiscal cliff and the downgrade of Puerto Rico’s general obligation debt by Moody’s Investors Service to Baa3, the lowest possible investment-grade rating. “That had a chilling effect on the markets,” McCoy said.
On Wednesday, the MTA’s full board will vote on the budget for fiscal 2013, including a series of subway fare and bridge-and-tunnel toll increases. The authority estimates that it needs $450 million of such revenue.
