Press Release|Public Finance
KBRA Assigns AAA Rating to Massachusetts Bay Transportation Authority Senior Sales Tax Bonds, 2025 Series A and Senior Sales Tax Bonds, 2025 Series B; Affirms Related Ratings
14 May 2025 | New York
KBRA assigns a long-term rating of AAA to the Massachusetts Bay Transportation Authority Senior Sales Tax Bonds, 2025 Series A and Senior Sales Tax Bonds, 2025 Series B. KBRA additionally affirms the long-term rating of AAA for the Authority's outstanding Senior Sales Tax Bonds and AA+ for the Authority's Subordinated Sales Tax Bonds (USDOT Loan). The rating Outlook is Stable.
Key Credit Considerations
The rating actions reflect the following key credit considerations:
Credit Positives
- Flow of funds requiring that pledged revenues must be used to pay debt service before being made available for other purposes insulates bondholders from MBTA operations.
- Pledged revenues provide strong coverage of both senior and combined sales tax bond pro forma MADS with residual amounts providing a substantial source of recurring financial support for capital and operating needs.
- Pledged revenue volatility is limited by the base revenue amount, an inflation-adjusted floor for pledged sales tax receipts, which at $1.16 billion for FY 2024 provides coverage of 3.08x senior and 2.34x combined pro forma MADS.
- Stable demographic trends and favorable socio-economic characteristics of tax base support growth and stability of pledged receipts.
Credit Challenges
- Pledged revenues have some sensitivity to economic cycles.
Rating Sensitivities
For Upgrade
- Not applicable to senior sales tax bonds given AAA rating level. A rating upgrade is not anticipated for the subordinated sales tax bonds (USDOT loans).
For Downgrade
- A significant decline in debt service coverage due to very large increases in sales tax bond leverage accompanied by significant and prolonged deterioration in the sales tax base.
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