Home Asides After payroll tax cut, Moody’s casts wary eye on MTA bonds

After payroll tax cut, Moody’s casts wary eye on MTA bonds

by Benjamin Kabak

As New York lawmakers push for a full payroll tax repeal with nary a nod toward its impact on the region’s transportation or economy, bond ratings are casting a wary eye on the MTA’s offerings as the agency’s revenue projections decline. As Bloomberg News reports, Moody’s Investment Services is warning of a “credit strain” at the MTA as the move to remove payroll tax funds “signals a shift in government support” for New York City’s transit network.

“The MTA’s financial operations are already tight, and failure to restore the lost revenue may put negative pressure on the MTA’s transportation-revenue bonds,” Nicole Johnson, a senior vice president, said in a Moody’s report. “Our credit analysis will focus on how the state establishes a new backstop.”

Moody’s currently rates the MTA bonds — which will soon be coming in bunches as the authority plans to support its capital plan through the issuance of debt — as A2 with a stable outlook. If a “credit strain” and lack of state support leads the ranking agencies to downgrade the bonds, it will cost the MTA more to issue them. No matter the outcome, the costs of the payroll tax repeal will fall on the shoulder’s of riders.

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SEAN December 20, 2011 - 12:48 pm

Wait a minute! Aren’t these the same agencies that OKayed on the default swaps that lead to the morggage crisis we are in now? These guys have ZERO CREDIBILITY as far as I am concerned.

BBnet3000 December 20, 2011 - 4:25 pm

Indeed. These guys are suddenly doing their jobs when its the public who stands to pay for it. They were sleeping on the job when banks were profiting off of selling crap assets.

Alex C December 20, 2011 - 6:00 pm

Maybe the MTA can do what the banks did and hire Moody’s to consult in exchange for higher ratings.

GABE December 20, 2011 - 4:48 pm

Just because the agencies got mortgage backed securities and highly structured products wrong, doesn’t mean they’ll get bond ratings wrong. The difference is, public and corporate bond models are tried and true vs. relatively new securitized products.

But what they’re writing is dead on the money. Any downgrade or negative outlook would oncrease yields and risks on the bonds, increasing borrowing costs. Interestingly, though, if the MTA had cash on hand, they would realize a gain if they buy their downgraded securities.

SEAN December 20, 2011 - 6:28 pm

It wasn’t just the fact they got it wrong, it was the fact they got it wrong & lied about it. Do the raiting agencies have any inside knowledge of anyone shorting the MTA Bonds?


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