Devastating Hurricane Sandy provided a small silver lining for the Utah Transit Authority: Delays caused by the super storm ended up saving the agency $13.9 million.
UTA had planned to borrow $320 million by issuing bonds last week — but Hurricane Sandy closed bond markets in the East and the sale was postponed. As the UTA board finalized selling bonds on Wednesday, it found interest rates had dropped significantly in the meantime.
Bonds help fund UTA projects
UTA is borrowing $320 million, partly to pay for:
A FrontRunner commuter rail extension from Salt Lake City to Provo , to open Dec. 10;
A TRAX extension to the Salt Lake City International Airport, to open April 14;
A TRAX extension to Draper, to open next summer; and
The new Sugar House streetcar line, set to open next winter.
Instead of paying the planned 4.25 percent interest, it paid 4.06 percent. Over the life of the bonds, that will save $13.9 million, UTA Chief Financial Officer Bob Biles said.
"We had over two times the requests for our paper than we had paper to sell," which helped drop the price in negotiated sales with buyers, Biles said.
UTA is borrowing $180 million to keep ongoing rail construction on track. The rest of the debt is to refinance older variable interest bonds, locking in currently available low rates over the long term.
Last month, Fitch ratings again gave UTA an "A+" bond rating, the same rating it gave UTA last year after lowering it from an "AA-" rating. At the time, Fitch said UTA’s "debt profile is somewhat weak" because "rising debt service has been shrinking revenues available for operations" and could hurt operations unless sales taxes pick up in a bad economy.
For the new bonds, Fitch said it is maintaining that lower rating even though the refinancing of variable rate bonds "somewhat improves an otherwise weak debt profile."
Fitch also said it believe UTA’s "long-term sales tax growth rate assumptions are somewhat aggressive" in how well UTA figures it can afford paying off the bonds.
Earlier this year, the Utah legislative auditor’s office warned that UTA was using overly optimistic revenue estimates and understated expenses in its planning and borrowing — a combination auditors feared "may threaten the agency’s ability to operate the system being built."
UTA has several rail lines nearing completion that will be financed in part from sale of the bonds, all of them scheduled to open over the next year or so.
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