Atlanta's MARTA transit agency upgraded to AA-plus by Fitch

The Metropolitan Atlanta Rapid Transit Authority was upgraded to AA-plus from AA by Fitch Ratings Wednesday.

The ratings affect MARTA’s sales tax revenue bonds rated by Fitch and its issuer default rating and carry a stable outlook. As of March 25, the authority had $2.02 billion in sales tax revenue bonds outstanding, according to Kroll Bond Rating Agency.

Fitch’s upgrade “reflects continued improvements in MARTA’s long-term liability burden as well as implementation under Fitch’s new ‘U.S. Public Finance Local Government Rating Criteria,'” Fitch said. “Growth in the personal income tax base and MARTA’s revenues have outpaced additional debt issuance.”

A MARTA rapid-transit train in the system’s Airport station. Its long-term liabilities have gone down and revenues have gone up, Fitch Ratings said.

MARTA

The new rating is supported by “strong long-term revenue growth prospects for the pledged revenues” and the revenue stream’s “strong resilience to modeled revenue declines at assumed leverage levels,” Fitch said.

In fiscal 2023 the pledged revenues totaled $704 million, roughly five times the debt service.

The bonds are secured by a first lien on sales tax receipts from the levy of a 1% sales tax in Fulton, DeKalb, and Clayton counties and an incremental 0.5% tax in Atlanta. Motor vehicle title ad valorem taxes are also pledged.

MARTA’s “population [served] in 2022 was of sufficient size and economy was sufficiently diversified to qualify for Fitch’s highest overall size/diversification category.”

S&P Global Ratings and KBRA rate the bonds AAA.

KBRA said, “The long-term rating reflects: the priority of payment of Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue Bonds from pledged gross receipts; the historic strength and resilience of the underlying pledged revenue base; the strong pro forma coverage of 5.20X maximum annual debt service from FY2023 pledged receipts; and the conservative additional bonds test requiring prior year receipts equivalent to at least 2.0x MADS.”

S&P said the rating stemmed from its view of MARTA’s “broad and diverse local economy… pledged revenue source with relatively low volatility that has exhibited robust growth trends and resilience through weaker economic cycles… very strong coverage and liquidity that we expect will remain so.” The flow of funds mitigates the risk that MARTA would divert the flow of funds to bondholders, S&P said.