Massachusetts issued $500 million in bonds to fund transportation projects.
The state sold the bonds in two series. The 2023 Series A bonds, consisting of $300 million, are term bonds which mature on June 1, 2053, and yield 4.34%. The 2023 Series B bonds, consisting of $200 million, are serial bonds which mature between 2047 and 2051, yielding between 4.22% and 4.31%. All of the bonds pay interest at 5%. The securities received a rating of Aa1 from Moody’s Investors Service, AAA from S&P Global Ratings, and AAA from Kroll Bond Rating Agency.
“Bondholder legal protections are strong, including legal considerations that incentivize the commonwealth to make required annual debt service appropriations and the constitutional limitation on the use of transportation revenues for transportation purposes,” according to Moody’s.
The bonds will primarily finance projects aimed at enhancing the state’s rail system. These include upgrades to lines operated by the Massachusetts Bay Transportation Authority (MBTA), a state agency which runs most public transit in Boston and its surrounding suburbs.
The so-called rail enhancement program will extend the MBTA’s green line to serve the cities of Cambridge, Somerville, and Medford. The extension is expected to cost $2.28 billion, with the state financing its share of the project, $1.06 billion, through bond issuances, according to the official statement accompanying the sale of the bonds.
The program will also expand a commuter rail line that originates in Boston to the cities of Fall River and New Bedford. The cities, in addition to the city of Taunton, are the only three cities within 50 miles of Boston without access to commuter rail. The state expects the project to cost $990 million and be funded by bonds, according to the bond documents.
The state will use additional bond proceeds to fund rail infrastructure improvements and acquire new cars for MBTA and commuter rail lines.
The bonds are special, limited obligations of the state, payable by pledged revenue, which is primarily composed of motor fuel taxes and vehicle registration fees.
BofA Securities, Inc served as lead underwriter on the issuance, purchasing the bonds with a discount of $1.6 million.