MBTA to issue $574 million in bonds

MBTA to issue $574 million in bonds

Money will be used for capital investments

THE MBTA, with $5.01 billion in debt outstanding, is preparing to borrow another $574 million to raise funds for capital projects.

“It’s an ambitious capital program and it needs to be because we need to make a dent in our state of good repair,” said Paul Brandley, the MBTA’s treasurer, referring to the backlog of projects needed to bring the T system up to snuff.

The MBTA plans to spend $7.4 billion over the next five years on new vehicles ($1.7 billion); track, signal, and power upgrades ($1.28 billion); modernization initiatives ($1.4 billion), and expansion projects ($1.6 billion).

T officials said they will borrow the $574 million by issuing bonds backed by sales tax revenues that by law are steered to the transit agency. The T’s debt service cost, which is paid out of the operating budget, is expected to rise from $451 million this fiscal year to $501 million in fiscal 2019 and then hover between $472 million and $507 million over the next eight years.

Despite the rise in debt service costs, T officials said the agency is not mortgaging its future to pay for repair projects now. Officials said they plan to pay down approximately $1.3 billion in existing principal over the next five years.

Transportation Secretary Stephanie Pollack said she was a student of MBTA debt in her previous work as an academic, and one of her biggest concerns was the T’s failure to pay principal down. She also said she was glad to see the T had successfully found a way to pay for a $492 million federally mandated project to prevent train crashes. The cost of the so-called positive train control program is being split between the federal government ($393 million) and the T ($99 million).

“When I walked in, we had no clue about how a half-billion dollar project was going to be paid for,” Pollack said.

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Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

Bradley said $418 million of the $574 million in bonds will meet the definition of sustainability bonds, meaning they are being used for climate resilience, energy efficiency, accessibility, passenger safety and other issues.

Bradley said the sustainability bonds may have little impact on the MBTA’s next bond issue, but he said they will likely command a premium in the future as bond holders want to make sure their money is going for such projects.

  • Mhmjjj2012

    What happens if the Retailers Association of Massachusetts are successful in getting their sales tax reduction question on the ballot for November 2018 and voters approve it? What sales tax revenues will back the MBTA’s bonds in that case?

    • QuincyQuarry.com

      Don’t hold me to it, but I think that the T receives a set cut of the sales tax (e.g., say, the first 1% of currently 6.25% sales tax rate is earmarked for the T) such that its sales tax revenue stream is as set as sales tax revenue can be.

      And even if such is not the case, fed expectations re local public transit funding would behoove the state to have to figure out a way to cover any sales tax revenue cut that resulted c/o a sales tax percentage RATE cut.

      Also note that the Retailers Association of Massachusetts and others are concurrently seeking to see currently sales tax exempt major online retailers pay state sales tax and so strive to end up tax revenue neutral post a sales tax rate cut.

      And finally, Beacon Hill would have to pull a tax out of its hat or facing a massive food fights over having to cut spending if something tax revenue neutral did not happen post a sales tax percentage RATE cut.

      • Mhmjjj2012

        There’s even more to it than I thought. Thanks.

  • Let’s mortgage the future and make the debt issued by the Comm of Mass greater than it’s ever been. You can use money to pay for debt or better transit service but not both. Like splitting a chicklet between 100 people