KBRA Assigns AAA Rating to Metropolitan Transit Authority of Harris County, TX Sales Tax Contractual Obligations Series 2026; Affirms Rating for Outstanding Bonds; Outlook Stable

NEW YORK--(BUSINESS WIRE)--KBRA assigns a long-term AAA rating to Metropolitan Transit Authority of Harris County, Texas (the Authority) Sales and Use Tax Contractual Obligations, Series 2026. Concurrently, KBRA assigns the AAA rating to the Authority's outstanding Contractual Obligations and affirms the AAA long-term rating on the Authority's outstanding Sales Tax Bonds. The Outlook is Stable.

Sales and Use Tax Contractual obligations are secured on parity by a gross lien pledge of 75% of receipts from a voter-authorized 1% sales and use tax (sales tax) collected on taxable transactions within the County service area. The remaining 25% of receipts are dedicated by the County electorate to general mobility purposes through September 2040. The Texas Comptroller acts as the collection agent for the sales and use tax, which is levied against the same tangible personal property and certain taxable services as the State sales and use tax.

Proceeds of the Sales and Use Tax Contractual Obligations Series 2026 (Series 2026) will finance the cost of acquiring or reimbursing the purchase of personal property including, but not limited to, light rail vehicles, bus rapid transit articulated buses, clean diesel and compressed natural gas transit and commuter buses, farebox equipment, and pay costs of issuance.

Key Credit Considerations

Credit Positives

• Economically vibrant service area that represents a substantial proportion of the nation’s fifth largest metropolitan area.
• Pledged sales tax revenues provide ample coverage of annual debt service and demonstrate consistent growth despite exposure to oil and gas industry cycles.
• ABT requirement of 2.0x MADS coverage limits overleveraging of pledged sales taxes.

Credit Challenges

• Bonds are secured by sales taxes, collections of which can be adversely affected by economic factors.
• Planned debt issuance may lower coverage and reduce residual sales tax revenues available for operations.

Rating Sensitivities

For Upgrade:

• Not applicable.

For Downgrade:

• Failure to manage capital plan execution risks, leading to a substantial increase in debt above what is expected.
• While unlikely, a significant and prolonged secular economic downturn resulting in a sharp reduction of pledged sales tax revenue collections and material reduction in debt service coverage and operational flexibility.

To access ratings and relevant documents, click here.

Methodologies

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

Doc ID: 1014307