Debt Program
Outstanding Debt
Metro issues long-term debt primarily to finance a portion of the capital costs of the County transportation system. The majority of Metro’s long-term debt has been issued to fund the costs of the regional rail system, including right-of-way acquisitions and system construction costs, and is secured by the Proposition A and Proposition C sales taxes. Metro has also issued long-term debt to finance vehicle purchases, to provide funding to the Alameda Corridor Transportation Authority’s rail corridor project, to construct the transit center and parking structure located at Union Station, to implement various highway improvement projects and to construct Metro’s headquarters building.
Balance August 2007 (in thousands) |
|
| Proposition A Sales Tax Revenue Bonds – First Tier Senior | $ 1,674,795 |
| Proposition A Sales Tax Revenue Bonds – Second Tier Senior | 27,620 |
| Proposition C Sales Tax Revenue Bonds – Second Tier | 1,283,295 |
| General Revenue Bonds | 223,960 |
| Grant Revenue Bonds | 239,710 |
| Total Long-Term Debt | $ 3,449,380 |
| Commercial Paper Notes | 187,202 |
| Total | $ 3,636,582 |
Sales Tax Revenue Bonds are paid from Proposition A and C sales tax revenues and were issued to provide funds for the acquisition and construction of major capital projects, such as rail construction, land acquisition and highway improvements.
Sales Tax Revenue Refunding Bonds are also paid from Proposition A and C sales tax revenues. These bonds were issued to refinance previously issued sales tax revenue bonds at more favorable interest rates, thereby reducing Metro’s debt service costs.
Certificates of Participation were issued by Metro in association the California Transit Finance Corporation (CTFC) for the purpose of providing supplementary financing for facilities, buses and other equipment. Metro makes lease payments to CTFC from State and Federal grant revenues.
Redevelopment and Housing Bonds have been issued by the Community Redevelopment Agency of the City of Los Angeles (CRA). Metro entered into an agreement with the Community Redevelopment Financing Authority (CRFA) of the CRA to pay a portion of the debt service for these bonds. Metro pays its portion of debt service from a subordinate pledge of Proposition A sales tax revenues.
General Revenue Bonds were issued to finance the cost of the 27-story headquarters building for Metro and to finance Metro’s workers’ compensation obligations. The bonds are primarily repaid from farebox revenues.
Grant Revenue Bonds were issued to provide "bridge funding" for the Gold Line Eastside Extension project. The bonds are repaid from 49 U.S.C. Section 5309 New Start grant revenues paid to Metro by the U.S. Department of Transportation Federal Transit Administration.
Commercial Paper Notes are issued by Metro to fund capital projects on a short-term basis prior to being permanently financed with long-term bonds or receiving grant funding. Metro issues both taxable and tax-exempt commercial paper notes, with original maturity dates ranging from one to 270 days, at various interest rates. Under the terms of the notes, Metro can roll-over the principal amounts due for additional periods.
Debt and Interest Rate Swap Policy
Metro Board of Directors (Metro Board) annually adopts a formal Debt Policy. The purpose of the Debt Policy is to establish guidelines for the issuance and management of Metro debt. This policy confirms the commitment of the Board, management, financial advisors and other decision makers to adhere to sound financial management practices, including full and timely repayment of all borrowings and achieving the lowest possible cost of capital within prudent risk parameters.
Metro Board also annually adopts an Interest Rate Swap Policy to establish guidelines for the use and management of interest rate swaps. The Interest Rate Swap Policy requires Metro to evaluate the risks, on an on-going basis, of its existing interest rate swap transactions.
Bond Ratings
Metro’s long-term bond ratings for certain lien levels are shown in the table below.
| Moody's | S&P | Fitch | |
| Proposition A | |||
| First Tier Senior | Aa3 | AAA | AA- |
| CRA Qualified Redevelopment | A2 | A+ | - |
| Proposition C | |||
| Second Senior | A1 | AA | AA- |
| General Revenue | A2 | A | - |
- Fitch Ratings Press Release Announcing LACMTA Bond Rating Upgrade -
October 2006 - Moody’s Investors Service New Issue Report Dated August 29, 2006 (Prop A)
- Moody’s Investors Service New Issue Report Dated August 29, 2006 (Prop C)
- Standard & Poor’s Credit Profile Dated August 18, 2006 (Prop A)
- Standard & Poor’s Credit Profile Dated August 18, 2006 (Prop C)
Leveraged Lease Program
As of June 30, 2005, Metro had over $888 million of leveraged lease obligations outstanding. Metro has entered into various agreements to lease heavy rail vehicles, light rail vehicles, real property operating facilities and transit buses to various investors and simultaneously entered into sublease agreements to lease them back. Metro received lease proceeds from the investors which were used to purchase investments that will be used to fund all future sublease rent payments. Amounts remaining above the costs of the investments represent Metro’s benefit from the leases and either have been or will be used by Metro to finance various capital projects.