NEW YORK (S&P Global Ratings) June 7, 2024--S&P Global Ratings said today that the likely indefinite postponement of the Metropolitan Transportation Authority, N.Y.'s (MTA) central business district tolling program (CBDTP) increases uncertainty regarding funding sources for MTA's current and next multiyear capital plan. At the same time, the postponement could eliminate the risk of lower traffic on MTA's bridges and tunnels.
As a result of these two developments, we don't anticipate revising the MTA's transportation revenue bonds (TRB) rating or outlook (A-/Positive) at this time. However, we are expecting MTA's upcoming July and November financial plans to provide clarity on this funding shortfall. We also anticipate the MTA will release the cost and funding plan for its next multiyear capital program this fall.
We also do not expect to change our rating on MTA's payroll mobility tax bonds (AA+/Stable), given that the pledge of revenues consists mainly of employer mobility tax collected from private- and public-sector employers within the Metropolitan Commuter Transportation District and is not dependent on MTA's operation or ridership levels.
On June 5, 2024, the Governor of New York directed the MTA to indefinitely postpone the implementation of its CBDTP, which was scheduled to start June 30, 2024, after years of study, planning, and multiple delays. In our view, this development adds to the uncertainty regarding where the MTA's post-pandemic ridership will ultimately settle, and could potentially constrain the MTA TRB rating.
Our positive outlook on the MTA TRBs rating reflects the potential for the authority's overall creditworthiness to improve over the two-year outlook period if we believe it can sustain financial metrics consistent with a higher rating. Additional enhancements to recurring revenue streams or establishing new recurring revenue streams are examples of management actions that would provide assurance of the MTA's ability to sustain all-in coverage close to 1.0x, per our calculations, should ridership levels and toll traffic volumes trend lower than expected. One-time or temporary actions to achieve a balanced budget would be less supportive of a higher rating.
Collection of the new CBDTP tolls would have imposed a $15 charge on cars entering Midtown below 60th Street, with the objective of reducing traffic and emissions in New York City while providing a critical funding source for the MTA's capital program. Revenues from the program were expected to provide $15 billion in funding for MTA's approved capital programs for its transit system. The governor said the state has set aside funding to backstop the MTA's capital plan and stakeholders are exploring other funding sources. Although we believe the MTA's operations are a key priority of the state, the nature and level of state support to replace congestion pricing, if delayed, introduce additional uncertainty to the outlook for the authority.
We understand the MTA is evaluating the situation, given the governor's direction, and the MTA is in communication internally and with Albany. The next regular MTA board meeting is scheduled for June 26, but any specific actions are not yet known. We expect the MTA's July financial plan, which will be available the week of July 29, will include recent developments, such as this announcement, and is anticipated to provide an update to MTA's funding options if congestion pricing revenues will not be available to support MTA's approved capital programs. Prior to the governor's direction to halt the CBDTP, and due to the uncertainty regarding when the related ongoing lawsuits would be resolved, in February 2024, the MTA announced it would not issue any new construction contract solicitations for the 2020-2024 capital program, except for emergency work, small business mentoring contracts, and certain projects that have dedicated federal funding.
This report does not constitute a rating action.
| Primary Credit Analyst: | Joseph J Pezzimenti, New York + 1 (212) 438 2038; joseph.pezzimenti@spglobal.com |
| Secondary Contacts: | Paul J Dyson, Austin + 1 (415) 371 5079; paul.dyson@spglobal.com |
| Ladunni M Okolo, Dallas + 1 (212) 438 1208; ladunni.okolo@spglobal.com |
No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.