KBRA Affirms Rating for Bi-State Development Agency Combined Lien Mass Transit Sales Tax Appropriation Bonds; Outlook is Stable

Kroll Bond Rating Agency (KBRA) affirms the long-term rating of AA+ with a Stable Outlook for the Bi-State Development Agency of the MO-IL Metropolitan District Combined Lien Mass Transit Sales Tax Appropriation Bonds.

The rating reflects strong maximum annual debt service coverage from appropriated transit sales taxes (TST), the large and diverse tax base in which the sales tax is collected, the historically stable performance of TST receipts, and KBRA’s view that appropriation risk is extremely limited, given the strict limitations on the use of TST receipts, which are available only for debt service and non-highway transit operations per the Transit Sales Tax Act as enacted by state statue.

A surveillance report will follow.

Key Credit Considerations

KBRA continues to monitor the direct and indirect impacts of the COVID-19 virus. Click here to access KBRA’s ongoing research on the topic.

The rating was affirmed because of the following key credit considerations:

Credit Positives

• Despite a substantial decline in TST receipts related to the pandemic, MADS coverage is sound and is projected to remain so even under KBRA’s conservative stress case scenarios.
• Aggregate annual debt service requirements of the Combined Lien Bonds decline steadily, with MADS of $25.3 million occurring in FY 2023. The Agency currently has no plans or authorization for additional debt.
• Strict limitations on the use of pledged sales tax revenues for non-highway public transportation strongly mitigates against appropriation risk.

Credit Challenges

• Transit sales tax collections are subject to legislative actions by the State, the County and the City.
• The inherent volatility of the sales tax revenue pledge may be exacerbated by the declining population base evidenced in the jurisdictional boundaries of the City and, to a lesser extent, the County.
• Substantial declines in ridership experienced since at least 2015 have been severely exacerbated by the pandemic.

Rating Sensitivities

For upgrade:

• Steady trend of growth in the economic resource base of the County and City that results in growing transit sales tax receipts.

For downgrade:

• A decline in debt service coverage due to a decrease in transit sales tax revenues or an increase in debt service associated with the issuance of additional parity bonds.

To access ratings and relevant documents, click here.

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

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