Utah Transit Authority gives preliminary OK to borrow more
The Utah Transit Authority is taking the first steps toward borrowing up to another $320 million to finance ongoing construction of new TRAX and FrontRunner commuter rail projects.
Its executive committee voted Monday to forward to UTA's full board a legal resolution to allow borrowing that much soon.
However, officials are unsure exactly how much they want to borrow.
They said Monday they have long planned to borrow about $180 million this year or early next year to finish financing projects that include extensions of FrontRunner from Salt Lake City to Provo, and TRAX extensions to Draper, Salt Lake City International Airport, West Valley City and Daybreak.
On top of that, they now also are considering refinancing up to $140 million in variable-rate bonds issued earlier, hoping to lock in relatively low long-term fixed rates.
"There is an opportunity like half of America faces in their homes: Do you refinance?" said UTA General Counsel Bruce Jones.
Chris Bleak, chairman of UTA's Finance & Operations Committee, said the variable rates acquired in previous bonds have remained unexpectedly low, but could spike at any time.
He said that locking in long-term rates now may make sense but some UTA staff prefer to wait until rates start to rise before locking in a fixed rate.
Bleak said a resolution allowing borrowing at the higher rate could give staff ability to move quickly if needed.
He also said bond rating companies would prefer that UTA have no more than about 10 percent of its debt in variable-rate bonds, but that percentage currently is about 14 to 15 percent. He said the proposed refinancing would bring it down to 7 to 8 percent.
Last year when UTA borrowed $100 million to keep its rail construction projects on track, Fitch Ratings downgraded UTA to an A+ rating from a AA- rating that it had given recently to similar UTA bonds.
Fitch Ratings said then that UTA's "debt profile is somewhat weak" because of relatively heavy debt where "rising debt service has been shrinking revenues available for operations" and could hurt operations unless sales taxes pick up significantly amid a bad economy.
Earlier this year, the Utah Legislative Auditor's Office warned that UTA was using overly optimistic revenue estimates and understated expenses a combination that auditors feared "may threaten the agency's ability to operate the system that is being built."
Among the audit findings were that debt payments are expected to grow to $166 million annually by 2020.
UTA officials blamed much of the forecasting gap on the recession and expressed confidence in its finances going forward.