A $125 million bond sale will finance another rapid bus route to speed service for transit riders in Indianapolis.
The Indianapolis Local Public Improvement Bond Bank will sell the bonds for the Indianapolis Public Transportation Corporation, or IndyGo.
The Series 2025A local income tax revenue bonds will fund the Blue Line Bus Rapid Transit Line project, which runs 24 miles between Indianapolis International Airport and downtown, then on to the eastern boundary of Marion County.
The bonds, to which S&P Global Ratings assigned an AA-minus rating and a stable outlook, had been scheduled to price Tuesday, a day marked by
"We offered an order period and decided to pull the deal," said Joe Glass, executive director and general counsel for the bond bank.
"We will continue to monitor the market and go day-by day," he said.
Lisa Soard, IndyGo's director of communications, told The Bond Buyer that "the decision was made to defer pricing until the market corrects."
Stifel, Nicolaus & Company is the lead underwriter. Crowe LLP is municipal advisor. Faegre Drinker Biddle and Reath LLP is bond counsel, according to the
The new rapid transit project will feature 36 new bus stations, with the Blue Line bus traveling down Washington Street within Marion County. IndyGo held a groundbreaking ceremony on Feb. 28.
Bus Rapid Transit is a fixed route service designed to emulate the service features of light rail, but in a more cost-effective way, according to IndyGo.
The Blue Line will be IndyGo's third BRT line.
Bond proceeds will also refund IndyGo's Series 2024A local income tax revenue bond anticipation notes, fund a reserve for the Series 2025A bonds and pay costs of issuance, according to an online investor presentation.
"The BANs were issued in 2024 to allow IndyGo to begin construction on the Blue Line bus rapid transit project with the intent to refund the BAN with a long term issuance in spring 2025," Glass said.
In September 2023, the board of directors of IndyGo authorized the issuance of the Series 2025A qualified obligations, which will be purchased using the proceeds of the Series 2025A bonds.
Principal and interest on the qualified obligations is payable by IndyGo solely from a special fund that receives a dedicated local income tax on residents in Marion County.
The City-County Council passed a special ordinance which irrevocably pledged all the transportation local income tax revenues to IndyGo for the payment of principal and interest on the 2025A qualified obligations. They are on a parity with the Series 2022A, Series 2022B, Series 2021A and Series 2018A qualified obligations.
The 2025A bonds are secured by a first-lien pledge of special purpose 0.25% transportation local income tax revenues collected within Marion County.
Those bonds and the qualified obligations are jointly secured by a debt service reserve fund, fully funded at closing, and sized at the least of maximum annual debt service; 125% of average annual debt service; or 10% of proceeds.
The POS notes that the DSRF will not constitute a reserve fund under Indiana code. If there is a deficiency, the bond bank "will not seek an appropriation from the City-County Council… to restore the debt service reserve fund to an amount equal to the debt service reserve requirement," the POS states.
Glass said the DSRF provides a margin of protection against a default.
"If ever the reserve is below the reserve requirement, IndyGo's Transportation LIT Revenues will be used to restore any deficiency," he said.
S&P affirmed IndyGo at AA-minus and stable March 26.
"The rating reflects our opinion of IndyGo's role as an essential public transit system and favorable financial metrics stemming from significant LIT revenue," said S&P senior analyst Andrew Stafford.
Stafford told The Bond Buyer S&P expects consistent revenue growth in the 0.25% transportation local income tax relative to IndyGo's current and projected annual debt service requirements.
As for any limitations on the DSRF, "In our view, the need for liquidity increases when coverage is lower and revenue volatility is higher," he said. "In the case of IndyGo's transportation local income tax revenue bonds, maximum annual debt service coverage is very strong at 3.5x, and we view volatility of the local income tax revenue stream to be very low."
Stafford noted IndyGo's farebox recovery ratio was about 5% of the system's revenues in fiscal year 2023, compared to about 9.5% in 2019. The system's post-pandemic ridership has recovered to about 75% of FY2019 levels.
Continued ridership recovery, he said, "would indicate stability across the system's broader operations and a level of essentiality to the Indianapolis metropolitan area," and could lead S&P to raise the rating.
After this transaction, IndyGo will have about $209.1 million of long-term debt outstanding.
