S&P Global Ratings has downgraded the bond rating for the Metropolitan Transportation Authority, citing concerns about debt service and operations funding.
S&P lowered its issuer credit rating to ‘A’ from ‘A+’, according to a report the agency released Friday.
S&P also lowered its long-term rating and underlying rating to ‘A’ from ‘A+’ on the MTA’s previously issued transportation revenue bonds.
Lowered credit ratings can make it more expensive to borrow money.
“The rating actions reflect our assessment of MTA’s 2018 midyear forecast and 2019 preliminary budget as detailed in its recently released July 2018 financial plan, as well as our view of MTA’s continued pressure on debt service coverage,” the agency wrote in the report.
“As a result, we no longer view the MTA’s overall creditworthiness as consistent with that of peer transit agencies rated ‘A+’ or higher, which have better coverage and less challenging funding issues,” S&P Global Ratings credit analyst Paul Dyson wrote.
"We’re disappointed in S&P’s actions," MTA finance director Pat McCoy said in a statement Sunday. "Debt service coverage is inherently strong for our bondholders. Bondholders have significant coverage under the Transportation Revenue Bond Resolution and we have a long track record of achieving balanced budgets every year.”
In issuing a negative outlook, the agency noted the MTA will face sizable funding challenges such as securing additional funding for operations and capital.
S&P said it could revise the outlook to stable in the next two years if, in part, the MTA can manage its growing capital needs and debt plans.
But the rating agency said it could downgrade the MTA further if it doesn’t find timely solutions to address issues including structural budget imbalances.