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Bulletin: New York MTA's Proposed $51 Billion Capital Program Indeterminate As A Credit Risk

Bulletin: New York MTA's Proposed $51 Billion Capital Program Indeterminate As A Credit Risk

SAN FRANCISCO (S&P Global Ratings) Sept. 18, 2019--S&P Global Ratings said 
today that it cannot yet determine if the New York Metropolitan Transportation 
Authority's (MTA) Sept. 16 announcement of its proposed $51.5 billion fiscal 
2020-24 capital program will affect S&P Global Ratings' A/Negative long-term 
rating and underlying rating (SPUR) on the MTA's transportation revenue bonds 
(TRBs) outstanding. Given the new program's preliminary nature, which still 
requires approval, timing of its implementation and impact to MTA key credit 
metrics is not yet available. Potential operating cost savings from MTA's 
Transformation Plan may offset potential higher debt service expenses from 
debt-financing the proposed program, if approved. 

The proposed capital program is 70% larger than the current fiscal 2015-19 
program, and, according to the plan, as much as $35 billion, or 68%, will be 
debt financed, including as much as $15 billion secured with future revenue 
from implementation of congestion pricing. While we already consider the MTA's 
all-in debt burden of approximately $40 billion (as of fiscal 2018) very high, 
the proposed plan could almost double the MTA's consolidated debt burden and 
place additional pressure on liquidity and already thin debt service coverage 
metrics, as calculated by S&P Global Ratings on an all-in, net revenue basis. 
Mitigating this risk is the MTA's ongoing work on its Transformation Plan, 
which could produce as much as $530 million of annually recurring savings, 
once fully implemented, from consolidation and efficiency opportunities. The 
MTA anticipates that the unprecedented capital investments will result in 
improved reliability, accessibility, and efficiency of its overall 
transportation network.

The proposed capital program is subject to modification and approval by the 
Capital Program Review Board later this year prior to finalization. We also 
understand that, over the next few months, the MTA intends to implement its 
previously announced Transformation Plan and potentially publish the revised 
savings estimates in its November 2019 Financial Plan. We believe the November 
Plan will likely shed additional light on the proposed capital program and its 
potential timing and impact. Thus, in our view, it is too early to conclude 
the proposed capital program's potential rating impact until additional 
information becomes available with regard to forecast bond issuance timing and 
the Transformation Plan's impact on key financial metrics. 

We will continue to monitor the developments related to the proposed capital 
plan and the MTA's progress with regard to the Transformation Plan and their 
combined impact on the MTA's TRB credit. For more information with regard to 
our rating on the MTA's TRBs, see our report published Aug. 7, 2019 on 

This report does not constitute a rating action.
Primary Credit Analyst:Paul J Dyson, San Francisco (1) 415-371-5079;
Secondary Contact:Joseph J Pezzimenti, New York (1) 212-438-2038;

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