Press Release|Public Finance

KBRA Affirms AAA Rating for MTA of Harris County, TX Sales and Use Tax Refunding Bonds; Outlook is Stable

21 Sep 2023   |   New York


KBRA affirms the long-term rating of AAA for the Metropolitan Transit Authority of Harris County, TX’s ("METRO") Sales and Use Tax Bonds. The Outlook is Stable.

Senior Lien Obligations, which include both the Bonds and Contractual Obligations, are METRO’s primary capital financing vehicle. These obligations are secured by a gross lien pledge of 75% of a 1% voter-authorized sales and use tax (“sales tax”) that is collected on certain taxable transactions within the service area. The Texas Comptroller acts as the collection agent. KBRA views the Texas Comptroller’s direct, monthly remittance of funds to the Trustee prior to a deposit with METRO to support operations, as a key credit strength supporting the timely repayment of debt service.

The Stable Outlook reflects KBRA’s expectation that the County’s economy, and in turn, METRO’s pledged sales tax revenue will continue to provide ample debt service coverage even with planned debt issuance.

A report will follow.

Key Credit Considerations

The rating was affirmed because of the following key credit considerations:

Credit Positives

  • Strong pledged revenue base that has performed well despite exposure to oil and gas industry cycles.
  • Sizable and growing service area that represents a substantial proportion of the nation’s fifth largest metropolitan area.
  • Additional Bonds Test ("ABT") requirement of 2.0x MADS coverage limits overleveraging of pledged sales taxes.

Credit Challenges

  • Bonds are secured by sales taxes, collections of which may at times be adversely affected by economic factors.
  • Significant planned bond issuance may lower coverage margins and reduce residual sales tax revenues available for operations.

Rating Sensitivities

For Upgrade

  • Not applicable at this rating level.

For Downgrade

  • Significant additional borrowing under the $3.5 billion METRONext authorization that reduces MADS coverage to levels much closer to the ABT.
  • Significant secular economic downturn that results in sharp reductions in pledged sales tax revenue collections.

To access rating and relevant documents, click here.


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