Improved rating and outlook reflect better-than-expected regional sales tax revenues and State of Illinois reinstatement of matching funds
CHICAGO, July 12, 2021 — Moody’s Investors Service has upgraded its rating on the Regional Transportation Authority (RTA) general obligation bonds, reflecting “resilience of regional sales tax revenue pledged to the bonds and with expected strong coverage of debt service,” according to the ratings agency.
Moody’s improved its rating of the bonds, which are backed primarily by regional sales tax revenue, to A1 from A2. Moody’s also revised its outlook for the RTA bonds to “stable” from “negative” and raised its short-term rating assigned to RTA’s Series 2005B extendible reset securities (ERS) from to P-1 from P-2.
According to a Moody's statement, “The upgrade of RTA’s credit rating incorporates substantial reductions in exposure to both state aid payment delays and the short-term borrowings that RTA resorted to as an offsetting measure. RTA’s rating also is supported by ample coverage of maximum annual debt service from the pledged regional sales tax, which has rebounded after a decline caused by the coronavirus pandemic.”
The $42.3 billion FY 2022 state budget passed by the Illinois General Assembly on May 31 was the first in five years that did not cut the RTA’s State of Illinois sales tax matching funds. Annually, the state is expected to provide a 30-percent match of revenue generated by the RTA regional sales tax. But in recent years, the state had reduced that match, costing the region's transit system approximately $70 million in operating funds since 2015.
“Restoration of the full state sales tax match commitment is crucial as our region’s transit system continues to recover from COVID-19 impacts,” said Kirk Dillard, RTA Board Chairman. “In addition to reflecting positively on State of Illinois fiscal progress, the Moody’s upgrade also indicates how the RTA has worked closely with CTA, Metra, and Pace to sustain funding for critical transit services during the pandemic. We remain committed to transparency and accountability as we now embark on development of a new strategic regional plan for transit’s future.”
According to Moody’s, “The rating also factors in the large economic base on which the RTA’s taxes are levied and the importance of mass transit to the greater Chicago area served by RTA's service boards.”