Moody's Assigns Aa2 Rating to Utah Transit Authority's Proposed Bonds

Strategic Insights -

Moody's Investors Service has issued a rating for the Utah Transit Authority's proposed $536.9 million Sales Tax Revenue And Refunding Bonds, Series 2025. The rating reflects the authority's robust size and strength, strong growth in pledged sales tax revenue, and manageable revenue volatility. The outlook is stable, with a rating rationale that considers the authority's essentiality as the primary transit provider in the Greater Salt Lake City area and its stable financial operations largely supported by local sales taxes.

Key Takeaways:

  • Moody's has assigned an Aa2 rating to Utah Transit Authority's proposed $536.9 million Sales Tax Revenue And Refunding Bonds, Series 2025.
  • The Aa2 rating reflects the authority's robust size and strength, with a service area encompassing 80% of the State of Utah's population.
  • The authority has demonstrated strong growth in pledged sales tax revenue over the last decade, with manageable historical revenue volatility.
  • Sound maximum annual debt service (MADS) coverage of 2.9 times on senior lien and 2.5 times on the two liens combined post issuance is a positive factor.
  • The authority's essentiality as the primary transit provider in the Greater Salt Lake City area and stable financial operations supported by local sales taxes are key positives.
  • The Aa3 rating on subordinate lien bonds is one notch lower than that on the senior lien bonds, reflecting the subordinated pledge and lower additional bonds test of 1.5 times peak total debt service.
  • The stable outlook reflects expected continued sound coverage of pledged sales tax revenue and maintenance of a balanced operating and capital budget.
  • Factors that could lead to an upgrade of the rating include sustained improvement in senior lien MADS coverage to over 4 times or stronger legal or policy constraints limiting additional leverage.
  • Factors that could lead to a downgrade include a deterioration in MADS coverage or inability to maintain balanced operations.

Statistics:

  • $536.9 million: proposed bond amount for the Sales Tax Revenue And Refunding Bonds, Series 2025
  • Aa2: rating assigned to the proposed senior lien bonds
  • Aa3: rating assigned to the subordinate lien bonds
  • 2.9 times: MADS coverage on senior lien bonds
  • 2.5 times: MADS coverage on the two liens combined post issuance
  • 80%: proportion of State of Utah's population served by the authority's service area
  • 2.8 million: population of the authority's service area
  • 1.45 billion: total outstanding senior lien sales tax revenue bonds
  • 481.8 million: total outstanding subordinate sales tax revenue bonds

Sources:

  • Moody's Investors Service, "Utah Transit Authority: Moody's Assigns Aa2 Rating to Utah Transit Authority's Proposed Bonds"