OREANDA-NEWS. Fitch Ratings has assigned an 'A' rating to the Metropolitan Transportation Authority (MTA), New York's approximately \\$600 million transportation revenue variable rate bonds, series 2015E. The 2015E bonds are expected to consist of subseries 2015E-1, subseries 2015E-2, subseries 2015E-3, subseries 2015E-4 and subseries 2015E-5.

The Rating Outlook is Stable.

KEY RATING DRIVERS
The 'A' rating reflects the gross lien on a diverse stream of pledged revenues, the essentiality of the MTA's transit network to the economy of the New York region, and the demonstrated ability of the MTA to produce near-term solutions for its operating and capital needs. The rating also reflects the need to generate sufficient cash to adequately cover operations of the system despite high debt service coverage ratios (DSCRs).

Strategic Importance: The MTA transportation network is essential to the economy of the New York region, with New York City Transit carrying an average of 8.14 million daily subway and bus riders and Metro-North Railroad and Long Island Rail Road (LIRR) carrying another 588,000 daily commuter rail passengers. While an independent authority, the MTA has received significant support from the state of New York in the form of additional tax sources aimed at closing projected operating budget gaps and addressing capital needs.

Highly Constrained Financial Operations: Despite high DSCRs from gross pledged revenues, the MTA's financial position is constrained given its extremely large operating profile and high fixed costs, including significant retiree pension benefits. In addition, some of the MTA's operating subsidies are vulnerable to economic conditions. While the MTA is required to provide a balanced current year budget, some tools available to meet a balanced budget, such as service reductions and fare increases, are politically unpopular.

Solid Security Pledge: The bonds are secured by a gross lien on a diverse stream of pledged operating revenues consisting of transit and commuter fares and excess bridge tolls and non-operating revenues consisting of various regional taxes.

Extremely Large Capital Needs: While the MTA's 2015-2019 proposed \\$29 billion Capital Program (Transit and Commuter Programs) was vetoed by the Capital Programs Review Board (CPRB), the proposed Transit and Commuter Capital Program assumes around \\$3.9 billion in MTA related debt. The proposed TBTA Capital Program (not subject to CPRB approval) is estimated to be \\$3.1 billion with approximately \\$2.3 billion funded from TBTA bonds. The MTA has historically faced the constant challenge of delicately balancing the large rehabilitation needs of the system and expansion projects while covering operating expenses and maintaining financial flexibility.

Growing Annual Debt Burden: The MTA's capacity to continue to leverage resources to fund expansion projects while meeting renewal and replacement needs may be limited in the future if projected financial performance or additional operating subsidies do not come to fruition.

Peer Comparison: Given the size and breadth of the MTA's network of transportation assets, there is no direct comparison for the entity.

RATING SENSITIVITIES
Negative:

--Inability to achieve future projected operating efficiencies and implement other key elements of the cost reduction initiatives and/or maintain an ongoing state of good repair and other elements of the capital program;
--Significant cost overruns or delays in the capital program's mega-projects that lead to additional borrowing or deferral of core capital projects;
--Receipts in dedicated tax subsidies that are measurably below forecast levels could pressure the MTA's financial flexibility.

Positive:

--Given small near-term operating surpluses but medium-term projected deficits positive rating movement is unlikely in the near term.

SUMMARY OF CREDIT
The series 2015E bonds are being issued to refinance certain outstanding indebtedness issues by the MTA for transit and commuter projects and to finance transit and commuter projects.

Fitch continues to monitor developments associated with the MTA's 2015-19 Capital Program. On July 23, the MTA's Chairman commented on a number of proposals suggested by the State and City including the use of alternative delivery methods such as design-build and public-private partnerships, streamlined procurement processes and a negotiated procurement process in non-traditional areas. The MTA estimates that the capital program budget could be reduced by 6-8%. Under these estimates the CPRB component of the Capital Program would be reduced to approximately \\$26.8 billion from \\$29 billion.

The MTA currently estimates funding from Federal, State and City aid along with MTA cash and bonding to cover roughly \\$17 billion of the Capital Program. This plan includes \\$2.4 billion of funding reflected in the July Plan attributable to unanticipated revenues, aggressive cost-cutting and more efficient operations. The Chairman proposed a number of state and city solutions to close the remaining roughly \\$9.8 billion gap over the five-year Capital Program. Fitch will monitor developments related to the various funding proposals.