KBRA Assigns AA Rating, Stable Outlook to Triborough Bridge and Tunnel Authority Real Estate Transfer Tax Revenue Bonds

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KBRA assigns a long-term rating of AA to the Triborough Bridge and Tunnel Authority (MTA Bridges and Tunnels) Real Estate Transfer Tax Revenue Bonds, Series 2026A (TBTA Capital Lockbox Fund). Concurrently, KBRA affirms the AA rating on outstanding parity bonds. The Outlook is Stable.

The rating reflects the non-appropriation pledge and statutory dedication of New York City Real Estate Transfer Tax (“RETT”) Receipts, which are transferred in monthly installments by the State Comptroller to the 2020 to 2024 Capital Program Account of the MTA Capital Lockbox Fund (the “Lockbox”) held by the Triborough Bridge and Tunnel Authority (“TBTA”, or “MTA Bridges and Tunnels”). Upon deposit to the Lockbox, RETT Receipts become subject to the lien of the TBTA RETT Bond Resolution and are statutorily segregated from the general operating budgets and other monies of the MTA and TBTA.

The sound legal and security provisions of the credit structure include a closed senior lien, a $150 million cap on maximum annual debt service (“MADS”) imposed by the TBTA RETT Resolution, a DSRF equal to aggregate MADS, to be immediately replenished if drawn upon, and a conservative flow of funds that allows for the capture of RETT Receipts well in advance of the debt service due date and prior to any transfers out. The statutory inability of TBTA to file for bankruptcy protection while RETT Revenue Bonds are outstanding, and the inability of creditors to file involuntary proceedings against TBTA, further support the rating. Additionally, RETT Receipts are statutorily dedicated and do not sunset. These positive features are somewhat offset by the lack of structural downside protection against RETT Receipts falling below $150 million – other than that provided by the MADS funded DSRF. New York City residential real estate sales values and unit transactions, as estimated, are sensitive to real estate market cyclicality, as well as to severe economic dislocations akin to the global financial crisis (“GFC”) and more recently the pandemic, making RETT Receipts potentially volatile. Additionally, the collection history for RETT Receipts is limited, with the 2020 bond year representing the first year of collections.

Key Credit Considerations

Credit Positives

Strong legal and security provisions adequately counterbalance the potential volatility of RETT receipts.
Sales volume, unit sales and estimated RETT amounts have increased substantially since 2003, with pronounced declines during the GFC and the pandemic followed by rapid recoveries.
To the extent that New York City real estate prices continue to increase, the RETT will apply to a larger percentage of City residential sales, as well as to most non-residential sales.

Credit Challenges

New York City residential real estate sales values and unit transactions, as estimated, are sensitive to real estate market cyclicality, as well as to severe economic dislocations akin to the GFC and the pandemic.
The short track record of actual RETT Receipts necessitates reliance on pro-forma estimates of historical performance for the period prior to 2020.
With the issuance of the Series 2026A Bonds, TBTA has leveraged pledged revenues up to the $150 million MADS cap.

Rating Sensitivities

For Upgrade

Sustained growth in the share of properties, sales volume and unit sales subject to the RETT, resulting in a trend of consecutive years of stable-to-improving MADS coverage.

For Downgrade

Sustained trend of narrowing MADS coverage stemming from a decline in RETT Receipts.
While unanticipated, year-over-year declines in annual sales volumes or sales units subject to the RETT that presage or are a function of fundamental changes in the New York City residential or commercial real estate markets.

To access ratings and relevant documents, click here.

Methodology

Public Finance: U.S. Special Tax Revenue Bond Rating Methodology

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), one of the major credit rating agencies (CRA), is a full-service CRA 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. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

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