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Rating Action:

Moody's assigns Aa2 to DART's (TX) Senior Lien Sales Tax Revenue Refunding Bonds, Ser. 2019; outlook stable

25 Feb 2019

New York, February 25, 2019 -- Moody's Investors Service has assigned a Aa2 rating to Dallas Area Rapid Transit, TX's (DART) $320.9 million Senior Lien Sales Tax Revenue Refunding Bonds, Series 2019. The outlook is stable.

RATINGS RATIONALE

DART's Aa2 senior lien sales tax rating reflects the broad and strong sales tax revenue stream pledged to pay debt service. Continued, robust growth of its service area population and surrounding economy bolster sales tax collections. Collections of pledged revenues by the state, the intercept by the trustee, and a 2x additional bonds test are strong legal features that insulate bondholders from possible DART fiscal stress. DART is increasing its debt burden by nearly a third with a recent issuance to fund a new commuter rail project. Additional debt is expected over the next five years for new projects and ongoing maintenance needs. Despite the increase in leverage, coverage projections remain above 2x, even assuming revenue declines during a possible recession.

RATING OUTLOOK

DART's stable outlook reflects our expectation that the economy will continue to outperform the nation, providing a solid revenue generating base. The outlook also reflects maintenance of adequate reserves and forward-looking policies to encourage ridership and maintain balanced operations.

FACTORS THAT COULD LEAD TO AN UPGRADE

- A stronger leverage constraint and/or debt burden reduction

- Consistently higher debt service coverage

- Stability in the pledged revenues through economic downturns than previous experience

FACTORS THAT COULD LEAD TO A DOWNGRADE

- Declines in the pledged sales tax

- Additional leverage beyond current forecasts that materially narrows coverage

- Divergence from DART's strong financial management, including reductions to existing reserve balances

LEGAL SECURITY

The bonds are secured by a senior gross lien on a 1% sales and use tax collected in DART's 13-member municipalities, approved by voters in 2000, along with certain farebox revenues. The sales tax is applied to the same base as the state sales tax (which broadly includes services but exempts groceries, health care supplies and residential utilities).

USE OF PROCEEDS

The proceeds of the bond will be to refund a portion of the Senior Lien Sales Tax Revenue Bonds, Taxable Series 2009B (Build America Bonds) for expected net present value savings.

PROFILE

DART provides bus, light rail, commuter rail and other service to 13 municipalities across a 700 square mile service area with an estimated population of 2.4 million in the Dallas, Texas region. The system was established by voter referendum in 1983 and is governed by a 15- member board appointed by the municipalities through a population-based formula, with no city able to appoint more than 65% of the board.

METHODOLOGY

The principal methodology used in this rating was US Public Finance Special Tax Methodology published in July 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Genevieve Nolan
Lead Analyst
State Ratings
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
US
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Timothy Blake
MANAGING DIRECTOR
Municipal Supported Products
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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