J00J00 – Maryland Transportation Authority
ratio of annual net revenues to annual debt service obligations. Altho ugh MDTA’s trust agreement does not stipulate a debt service coverage ratio, the MDTA Board has established an administrative policy requiring 2.0 times debt service coverage, and the MDTA’s Transportation Infrastructure Finance and Innovation Act Loan Agreement also contains a 2.0 times debt service coverage covenant. This ratio equates to the ability of MDTA to use half or less of its annual revenues to cover debt service obligations during the same year. In fiscal 2026, the debt service coverage ratio is projected to be 2.6. Due to a significant increase in total debt outstanding projected between fiscal 2026 and 2030, the projected debt service coverage ratio declines steadily throughout the forecast period and is expected to dip below the 2.0 level to 1.7 in fiscal 2028. By fiscal 2030, the debt service coverage ratio declines further to 1.5. The rate covenant compliance ratio, as stipulated in the trust agreement, requires that the ratio of net revenues (total revenues minus operating expenses) to the amount deposited into the Maintenance and Operating Reserve Account plus 120% of debt service be at least 1.0. The additional bonds test requires that the rate covenant is met on a five-year prospective basis. The fiscal 2026 rate covenant compliance ratio is projected to be 2.0 and adequate coverage is provided throughout the financial forecast period. However, there is a steady decline throughout the forecast with the ratio falling to 1.1 in fiscal 2030. The agency also has an administrative policy to maintain an unencumbered cash balance of at least $400 million. The MDTA Board approved an increase of this threshold from $350 million in November 2023 to conform to agency growth and inflation. Bond rating agencies view the amount of cash on hand relative to operating expenses as a liquidity measure to ensure that operations can continue even if revenues are lower than expected, expenses are higher than expected, or if there is a temporary loss of revenues. MDTA reports that for other AA-rated toll agencies, the median cash on hand is sufficient to fund operations for at least 12 months. Expenditures are projected to outpace revenues in fiscal 2025 and 2026, largely due to growth in the capital program, before equaling each other in fiscal 2027 through 2030. As a result, the unencumbered cash balance declines from $733.6 million at the end of fiscal 2024 to the $400 million minimum threshold in fiscal 2026 and remains at that level through the remainder of the forecast period. The January 2025 MDTA financial forecast reflects additional fiscal stress on the horizon compared to the January 2024 forecast, which projected that debt service coverage would fall below acceptable levels in fiscal 2029, one year later than current projections. Due to this forecast change, MDTA projects the need for a systemwide toll increase during the six-year forecast period in order to maintain compliance with the legal obligations set forth in the trust agreement and loan agreements to maintain MDTA ’ s favorable bond rating. MDTA should comment on the timing of potential toll increases and how they would be implemented.
2.
Impacts of the Francis Scott Key Bridge Collapse
On March 26, 2024, the M/V Dali, a 947-foot container ship collided into one of the primary support piers of the Francis Scott Key Bridge, resulting in the bridge’s collapse. The
Analysis of the FY 2026 Maryland Executive Budget, 2025 22
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