Massachusetts governor seeks more bonds for transit and transportation

Bonds

Massachusetts Governor Maura T. Healey’s $56.1 billion budget proposal for fiscal 2025 calls for increased funding to the state’s Commonwealth Transportation Fund that will enable it to borrow an additional $1.1 billion over the next five years.

The fiscal 2025 budget proposal, which represents a 2.9% increase over the current year’s spending, would dedicate $250 million of transportation revenues from the Fair Share income tax surtax enacted in 2022 directly into the CTF, “unlocking the capacity to borrow an additional $1.1 billion for capital projects” at the Department of Transportation and the Massachusetts Bay Transit Authority over the next five years, according to the governor’s executive summary of the budget proposal.

Additional borrowing enabled by dedicated Fair Share revenue would be used in fiscal 2025 “to immediately invest an additional $300 million” to help fund the MBTA’s track improvement plan, the governor’s proposal said. The Boston area’s public transit provider has been wracked by high-profile safety problems.

Massachusetts Gov. Maura Healey announces her fiscal 2025 budget recommendation at a State House press conference on Jan. 24, 2024.

Joshua Qualls/Governor’s Press Office

According to the budget message, which was announced on January 24, $250 million will be earmarked for additional debt service for the CTF. The funds would come from the state’s Fair Share income tax surtax that was approved by Massachusetts voters in November 2022. That measure imposes a 4% surtax on incomes above $1 million that is expected to generate over $2 billion annually to fund education, repairs and maintenance of roads and bridges, and improve public transit.

All told, the governor’s 2025 proposed budget would include $1.3 billion from the new levy, up from $1 billion in the current fiscal year’s budget.

If approved, $63 million of the $250 million of Fair Share transportation revenues would be reserved for debt service on additional CTF bonds. Of the remaining $187 million, $127 million would be used to double the MBTA’s operating subsidy to $256 million while $60 million would be used to support MassDOT operations, including customer service at the state’s Registry of Motor Vehicles agency. The MBTA also receives $1.5 billion from a portion of the state’s sales tax revenue.

In April 2022 the Federal Transit Authority launched a safety management inspection of the MBTA following several high-profile accidents. Following the inspection, it reprimanded the MBTA, the country’s oldest and fifth-largest transit system, for “compromising” safety by favoring its capital program over safety, mainly by taking the “unprecedented step” of transferring $500 million from its general fund into its capital budget in January 2022. The FTA said MBTA appeared to have prioritized new-build projects over preventative maintenance.

The federal agency ordered the MBTA and its state oversight agency, the Department of Public Utilities, to take immediate action to improve safety across the system. The FTA said the MBTA “lacks resources to adequately manage its $2 billion capital program and complete capital projects on time and without need for retrofits and workarounds.”

According to the governor’s budget proposal, “additional capital borrowing capacity, leveraged from Fair Share revenues, will help the MBTA improve safety, service, and sustainability.”

Fair Share investments will also allow MassDOT to “continue investments in critical bridge infrastructure and keep Massachusetts roadway construction crews engaged and on the job,” the budget documents said.

Increased operating funding will also help the MBTA to continue improving safety, reliability and service, the proposal said.

The budget recommendation also includes $169 million for operating assistance to 15 regional transit authorities across the state, including $75 million from Fair Share revenues.

MBTA senior sales tax bonds are rated AAA by Fitch Ratings and Kroll Bond Rating Agency and AA-plus by S&P Global Ratings.

Massachusetts Commonwealth Transportation Fund revenue bonds are rated AAA by Kroll and S&P, and Aa1 by Moody’s Investors Service.

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