Sound Transit signs $1.99 billion loan agreement covering four light rail projects

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Sound Transit and the U.S. Department of Transportation last week executed a $1.99 billion credit agreement under the Transportation Infrastructure Finance and Innovation Act, offering expected long-term savings of between $200 million and $300 million for regional taxpayers through reduced borrowing costs.

Sound Transit applied for the U.S. Department of Transportation loans to insulate the agency from unexpected downturns in the economy and provide taxpayers savings from agency borrowing costs. The loans allow the agency to borrow money at rates that are typically significantly lower than otherwise available.

The $200 million to $300 million of savings are forecasted to accrue over the 35-year lives of the loans and are in relation to the borrowing costs assumed in Sound Transit’s financial plan. The loans improve the agency’s long-term financial outlook and reduce risks associated with completing regional transit projects approved by voters in both 2008 and 2016. However, it will not be prudent in the near term to “spend” or assume a specific amount of additional financial capacity. Borrowing rates, tax collections, project costs and many other financial assumptions will all require close monitoring in coming years.

The loans will support the following projects:

Northgate Link – 4.3-mile extension from the University of Washington Station at Husky Stadium to Northgate Mall, opening in 2021. Loan amount: $615.3 million
Lynnwood Link – 8.5-mile extension from Northgate to the Lynnwood Transit Center, opening in 2023. Loan amount: $657.9 million
Federal Way Link Extension – 7.5-mile extension from South 200th Street in the City of SeaTac to the Federal Way Transit Center, opening in 2024. Loan amount: $629.5 million.
New Operations and Maintenance Facility, which will support a growing light rail system serving trains to Lynnwood, Bellevue/Overlake and Kent/Des Moines. Loan amount: $87.7 million.

Enacted by Congress to provide credit assistance for qualified regional and national transportation projects, Transportation Infrastructure Finance and Innovation Act loans can increase the financial capacity and enhance the credit of the borrower by offering flexible repayment terms and potentially more favorable interest rates than can be found in traditional capital markets. Sound Transit’s loans were upgraded from A+ to AA+ by Fitch Ratings, Inc. and from A- to A+ by Standard and Poor’s ahead of the close of the MCA and Northgate loan.

In advance of a sale of bonds executed earlier this month, the agency received a rating upgrade from Moody’s for its Senior bonds from Aa1 to its highest AAA rating. Moody’s also upgraded the agency’s Parity bonds from Aa2 to Aa1

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