This issue is an excellent example of the domino effect. Metro and other California transit agencies were threatened with losing billions of dollars in federal funds because of a dispute between the state and the U.S. Department of Labor over whether the state’s pension reform violated the rights of transit workers.
As a result, Moody’s had threatened to downgrade the credit ratings for Metro and other agencies. That, in turn, would have made it very difficult for Metro to negotiate loans and bonds. Losing federal funds and lending ability would have spell doom for several Metro projects, including the Purple Line Extension and the Regional Connector.
A state bill, AB 1222, approved by the Legislature last week solves the problem for now. Some transit workers will be exempted from pension reform, the state-Labor Department dispute will be resolved in court and now Moody’s has confirmed Metro’s credit rating.
Thank whew-ness! Here’s the update from Metro CEO Art Leahy:
PEPRA/13(C) Update: Moody’s Investor Service Confirms Credit Ratings for California Transit Agencies
Earlier today, Moody’s Investor Service confirmed the credit rating for our agency and other California transit agencies, and revised their outlooks to stable based on legislation (AB1222) recently adopted by the California State Legislature. Governor Brown is expected to sign the bill into law in the very near future. Last month, Moody’s issued a notice that it had placed the ratings for our agency and other transit agencies in the State of California under review for downgrade due to the ongoing PEPRA/13C dispute. The Moody’s notice cited the U.S. Department of Labor’s potential delay in certifying federal transportation grants (capital and operations) as the rationale for placing the transportation agencies under review for downgrade. I would like to extend our appreciation to our Board members, Governor Brown, members of the California State Legislature, our U.S. Senators and Members of the House of Representatives from Los Angeles County and senior officials at the U.S. Department of Transportation for working cooperatively with our staff to favorably resolve this matter. Please find here a copy of Moody’s notice.