Fitch downgrades MTA to

New York’s Metropolitan Transportation Authority debt was downgraded Thursday by Fitch Ratings, one of three ratings agencies on Wall Street, from “A+” to “A”. The move could mean MTA would have pay more for its debt, exacerbating its already stressed budgetary status.

“Fitch Ratings has assigned an ‘A’ rating to the Metropolitan Transportation Authority, New York’s (MTA) $99,560,000 transportation revenue variable rate bonds, series 2011B. At this time, Fitch also downgrades the rating on $14.3 billion in outstanding MTA transportation revenue bonds to ‘A’ from ‘A+’. The downgrade reflects higher than expected near-to-medium term financial pressure,” Fitch said in a press release.

“The Rating Outlook is revised to Stable. Fitch will shortly assign short and long-term credit enhanced ratings on the series 2011B bonds,” the agency added.

The move came as concerns mount over MTA’s ability to complete several large capital construction projects on time and on budget, as well as a “brain drain” of top management officials seeking more lucrative employment elsewhere due to salary caps imposed by MTA as a cost-saving measure. The exodus includes the departure of MTA Chairman and CEO Jay H. Walder, who steps down Oct. 21 and will serve as CEO of MTR Corp. beginning in January.

Fitch noted the downgrade “reflects higher than expected near-to-medium term financial pressure stemming from increasing operating costs (projected to moderate in growth in the outer years) and pension obligations and growing annual debt service obligations from expected near-term issuance associated with the capital program. This is exacerbated by the strong likelihood that operating subsides (dedicated tax sources) will not grow as anticipated in the near term leading to wider deficits. The Stable Outlook reflects the authority’s institutional focus on monitoring developments and willingness to take corrective action albeit that the options available are fewer in the current environment.

“While the MTA forecasts a sizeable surplus of $170 million in 2011 as well as a modest surplus of $4 million in 2012 growing to $125 million in 2013, underlying assumptions related to management’s continued ability to implement new cost containment initiatives, growth in operating subsidies (regional dedicated taxes, mortgage taxes and the payroll mobility tax) as well as yields on toll and fare increases are of concern and must still come to fruition. Forecasted deficits of $54 million in 2014 and $178 million in 2015 may be greater than estimated if the underlying assumptions on either the expense or revenue side are not achieved in the near term,” Fitch concluded.