KBRA Assigns AA Rating to the Triborough Bridge and Tunnel Authority Real Estate Transfer Tax Revenue Bonds, Series 2025A (TBTA Capital Lockbox Fund); Outlook is Stable
19 Dec 2024 | New York
KBRA assigns a long-term rating of AA to the Triborough Bridge and Tunnel Authority Real Estate Transfer Tax Revenue Bonds, Series 2025A (TBTA Capital Lockbox Fund). The Outlook is Stable. The rating reflects KBRA's positive view of i) the non-appropriation pledge and statutory dedication of New York City Real Estate Transfer Tax ("RETT") receipts transferred monthly by the State Comptroller to the Central Business District Tolling Capital Lockbox Fund held by TBTA; ii) the sound legal and security provisions of the credit structure; iii) the solid, though volatile, trend of coverage of maximum annual debt service (capped at $150 million) over the four year timeframe of actual receipts; and iv) TBTA's statutory inability to file for bankruptcy protection, and the inability of creditors to file involuntary proceedings against TBTA during the pendancy of the Bonds. Counterbalancing these strengths are the lack of at least five years of historical RETT receipts, and the volatility of annual sales volumes and unit sales subject to the RETT.
Key Credit Considerations
The rating was assigned because of the following key credit considerations:
Credit Positives
- Strong legal and security provisions adequately counterbalance the potential volatility of RETT receipts.
- To the extent that real estate sales prices continue to increase, the RETT will apply to a larger percentage of City residential sales, as well as to most non-residential sales. An estimated 25.6% of residential sales volume and 9.3% of residential unit sales was subject to the RETT in 2023.
- Since 2012, the residential component of estimated pro-forma RETT Receipts alone provided more than 1.0x MADS coverage. MADS coverage from actual RETT Receipts (residential and non-residential) over the 2020-2024 period averaged 2.3x.
Credit Challenges
- The short track record of actual RETT Receipts necessitates reliance on pro-forma estimates of historical performance.
- New York City residential real estate sales values and unit transactions, as estimated, have proven particularly sensitive to real estate market cyclicality, as well as to severe economic dislocations including the GFC and the COVID-19 pandemic.
- TBTA intends to leverage pledged revenues up to the $150 million MADS cap (approximately $2.0 - $2.3 billion in debt issuance) in 2025.
Rating Sensitivities
For Upgrade:
- Sustained increases in the share of properties, sales volume and number of unit sales subject to the RETT, resulting in a trend of consecutive years of stable to improving MADS coverage.
For Downgrade:
- A decline in RETT Receipts resulting in MADS coverage of 1.15x or below. The 1.15x threshold takes into consideration the lowest estimated pro-forma coverage in a year that was not associated with a severe economic dislocation (1.17x in 2011).
This press release has been revised on December 20, 2024 to correct a typographical error.
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