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The Utah Transit Authority board gave initial approval Wednesday to borrow another $180 million to finance the ongoing construction of TRAX and FrontRunner rail projects, and also refinance up to $140 million of earlier borrowing to try to lock in low interest rates.
Before final action is taken, the agency will hold a public hearing Oct. 24.
Board member Chris Bleak said UTA has always planned to issue another $180 million in bonds to finish what it calls its 2015 projects which include extensions of the FrontRunner commuter rail from Salt Lake City to Provo, and TRAX light rail extensions to Draper, Salt Lake City International Airport, West Valley City and Daybreak.
Bruce Jones, UTA's general counsel, said UTA actually now plans to borrow a bit less than earlier envisioned. He said all of the projects are being built for less than originally anticipated, and years earlier. "It is an amazing accomplishment for the people of Utah," he said.
Also because of current low interest rates, Bleak said UTA is looking at refinancing up to $140 million in previously issued variable interest rate bonds. He said their rates have remained unexpectedly low, but could spike at any time. He said locking in slightly higher rates for the long term could save money.
"Most people would understand that as they go about getting their own home mortgages. Everyone is making these calculations themselves. Does it make sense to lock in now? That's really what we're doing," Bleak said.
Bleak also said refinancing could help UTA's bond rating. He has said that bond rating companies would prefer that UTA have no more than about 10 percent of its debt in variable-rate bonds, but that percentage currently is about 14 to 15 percent. He said the proposed refinancing would bring it down to 7 to 8 percent.
Last year when UTA borrowed $100 million to keep its rail construction projects on track, Fitch Ratings downgraded UTA to an A+ rating from a AA- rating that it had given recently to similar UTA bonds.
Fitch Ratings said then that UTA's "debt profile is somewhat weak" because of relatively heavy debt where "rising debt service has been shrinking revenues available for operations" and could hurt operations unless sales taxes pick up significantly amid a bad economy.
Earlier this year, the Utah Legislative Auditor's Office warned that UTA was using overly optimistic revenue estimates and understated expenses a combination that auditors feared "may threaten the agency's ability to operate the system that is being built."
Among the audit findings were that debt payments are expected to grow to $166 million annually by 2020.
UTA officials blamed much of the forecasting gap on the recession and expressed confidence in its finances going forward.
UTA will hold a public hearing Oct. 24 at 2:30 p.m. about the possible issuance of $320 million worth of bonds. The hearing is at UTA headquarters, 669 W. 200 So. in Salt Lake City.