KBRA Affirms AA- Rating, Revises Outlook to Negative on Chicago Transit Authority, IL TIFIA Bonds
8 Apr 2025 | New York
KBRA affirms the long-term rating of AA- and revises the Outlook to Negative from Stable for the Chicago Transit Authority Series 2015 TIFIA Bonds (Your New Blue Project) and Series 2016A TIFIA Bonds (Rail Fleet Renewal Project). The Outlook revision reflects the continued absence of a long-term funding solution to address looming CTA operating budget shortfalls estimated at approximately 25% of total operating expenses in fiscal years 2026 and 2027, respectively. An ongoing lack of clarity regarding CTA’s role in the potential consolidation of regional transit systems heightens the uncertainty regarding CTA’s operating environment and contributes to the Outlook revision. The CTA Board has appointed experienced veterans to replace the recent departures of the Authority's President and its Chief Financial Officer.
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- The strong security provisions of the April 1, 2014 TIFIA loan Master Trust Indenture (“the MTI”) and the essentiality of CTA’s urban transit operations to the economic and social infrastructure of the greater Chicago metropolitan area underpin the rating.
- The gross revenue pledge supports currently robust coverage of TIFIA loan debt service.
Credit Challenges
- CTA faces a $539 million 2026 operating budget gap upon expiration of Federal stimulus funding.
- CTA’s high fixed-cost structure contributes to a lack of operating expense flexibility. Liquidity is low.
- Farebox revenues are economically volatile. Severe service declines precipitated by funding insufficiencies could interrupt or reverse CTA’s ridership recovery trend.
Rating Sensitivities
For Upgrade
- Identification of one or more permanent sources of revenue, enabling a structurally balanced operating budget in 2026 and beyond.
- Sustained annual increases in total operating revenue that outpace growth in operating expenditures.
- A trend of improved system liquidity.
For Downgrade
- A worsening trend of structurally unbalanced financial operations and/or a significant decline in system liquidity.
- The inability to achieve long-term structural balance will pressure the rating.
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