Meeting_Body
FINANCE, BUDGET AND AUDIT COMMITTEE
MARCH 19, 2026
Subject
SUBJECT: MEASURE R BONDS
Action
ACTION: APPROVE RECOMMENDATION
Heading
RECOMMENDATION
Title
ADOPT a Resolution (Attachment A) that authorizes the issuance and negotiated sale of up to $980 million in aggregate principal amount of Measure R Sales Tax Revenue Senior Bonds (the “Bonds”), in one or more series, to refund the Measure R Senior Sales Tax Revenue Bonds, Series 2016-A (the “Refunded Bonds"), finance capital projects, reimburse LACMTA for the development and construction of certain projects, refund outstanding Measure R Commercial Paper Notes, and to take of all other actions necessary in connection with the issuance of the Bonds.
(REQUIRES SEPARATE, SIMPLE MAJORITY VOTE OF THE BOARD)
Issue
ISSUE
The Debt Policy requires Metro to continuously review its outstanding obligations for economic, cost-effective opportunities, or other “non-economic” reasons to issue refunding obligations. In addition, the Debt Policy provides guidelines for new money financings that may be long-term or short-term. Measure R new money bond issues are permitted to provide funding for eligible expenditures on capital projects.
Background
BACKGROUND
Approval of the above recommendations will authorize the issuance of the Bonds, with a par amount not-to-exceed $980 million of fixed-rate bonds, which will refund $366 million of the outstanding callable Refunded Bonds on a current basis for debt service savings, fund $435 million of LACMTA Measure R eligible capital projects and expenditures and refund $150 million in outstanding Commercial Paper. The Refunded Bonds may be currently callable in April 2026 as their call date is June 1, 2026. Based on market conditions as of February 17, 2026, the refunding of the Refunded Bonds was estimated to provide $42.3 million (or 10.96%) in net present value savings, which is above the minimum 3% of the refunded par amount set forth in the Debt Policy criteria for evaluating refunding opportunities.
Discussion
DISCUSSION
The Bonds will be structured as fixed rate bonds and will be sold using a negotiated sale method. If market conditions change suddenly, a negotiated sale provides Metro the flexibility to alter the sale date and/or bond structure, as needed. A negotiated sale method also allows Metro an opportunity to include underwriting firms classified as SBEs and DVBEs to participate in the financing. The underwriters will pre-market the issue to target as many investors as possible, assist with the credit rating process, and advise on market conditions for optimal bond pricing.
Consistent with the Debt Policy, underwriters for this transaction will be selected by a competitive Request for Proposal (“RFP”) process conducted by Montague DeRose & Associates, LLC, Metro’s Transaction Municipal Advisor. Norton Rose Fulbright and Nixon Peabody LLP has been selected by Treasury staff and County Counsel to serve as Bond Counsel and Disclosure Counsel, respectively.
Further, in accordance with Section 8(i)(4) of the Measure R Ordinance, the Measure R Independent Taxpayers Oversight Committee of LACMTA (“Measure R Oversight Committee”) is required to find that the benefits of the refunding of $150 million in outstanding Commercial Paper and proposed $435 million financing for accelerating project delivery, avoiding future cost escalation, and related factors exceed issuance and interest costs. The Measure R Oversight Committee made a finding of benefit at its March 9, 2026, meeting, Attachment B.
Determination_Of_Safety_Impact
DETERMINATION OF SAFETY IMPACT
Approval of this item will not impact the safety of Metro’s patrons or employees.
Financial_Impact
FINANCIAL IMPACT
The cost of issuance of $1.68 million for the Bonds, which is presented in the Good Faith Estimates section of the Resolution, will be paid from the proceeds of the financing and will be budget neutral.
Savings from the Measure R refunding bonds will be reflected in future budgets under principal account 51101 and the bond interest account 51121.
Funding for the Measure R new money bond principal and interest expense for this Measure R financing will be added to FY26 and subsequent fiscal year budgets depending on the actual debt service schedule. The funding sources or debt service of this financing are eligible for bus and rail operating and capital expenditures.
Equity_Platform
EQUITY PLATFORM
Approval of this item is intended to reduce financial risk and maintain planned funding and schedules for Metro capital projects funded by Measure R. At this time, there are no equity concerns anticipated as a result of this action.
Vehicle_Miles_Traveled_Outcome
VEHICLE MILES TRAVELED OUTCOME
VMT and VMT per capita in Los Angeles County are lower than national averages, the lowest in the SCAG region, and on the lower end of VMT per capita statewide, with these declining VMT trends due in part to Metro’s significant investment in rail and bus transit.* Metro’s Board-adopted VMT reduction targets align with California’s statewide climate goals, including achieving carbon neutrality by 2045. To ensure continued progress, all Board items are assessed for their potential impact on VMT.
As part of these ongoing efforts, this item is expected to contribute to further reductions in VMT. While this item does not directly encourage taking transit, sharing a ride, or using active transportation, it is a vital part of Metro operations, as it will provide funds needed to finance the acquisition and construction of the rail, bus and highway transit system and facilities within the County of Los Angeles. Because the Metro Board has adopted an agency-wide VMT Reduction Target, and this item supports the overall function of the agency, this item is consistent with the goals of reducing VMT.
* Based on population estimates from the United States Census and VMT estimates from Caltrans’ Highway Performance Monitoring System (HPMS) data between 2001-2019.
Implementation_of_Strategic_Plan_Goals
IMPLEMENTATION OF STRATEGIC PLAN GOALS
The recommendation supports Metro Vision 2028 Strategic Plan Goal 5 as follows:
Goal 5: Provide responsive, accountable, and trustworthy governance within the Metro organization.
Alternatives_Considered
ALTERNATIVES CONSIDERED
The Board could defer the issuance of the refunding to a later time or indefinitely. This is not recommended because we cannot predict that interest rates will remain low enough to generate comparable benefits. Federal Reserve Bank actions and all other market and economic conditions may push interest rates higher and result in a loss of refunding savings. Additionally, the Board could defer the issuance of the new money bonds to a later date or indefinitely. However, this is not recommended, as bond proceeds are needed to pay or reimburse project expenses. Without this financing, capital projects may lack sufficient cash flow, resulting in delays until funds can be accumulated on a “pay-as-you-go” basis and potentially higher costs due to increased labor and material prices.
Next_Steps
NEXT STEPS
Obtain ratings on the Bonds
Complete legal documentation and distribute the preliminary official statement to potential investors, and initiate the pre-marketing efforts
Negotiate the sale of the Bonds with the underwriters
Attachments
ATTACHMENTS
Attachment A - Authorizing Resolution
Attachment B - Measure R Oversight Committee Finding of Benefit Resolution
Prepared_by
Prepared by: Rodney Johnson, Treasurer, (213) 922-3417
Matthew Wingert, Senior Budget Manager, (213) 922-2553
Robert Suh, Budget Manager, (213) 922-4102
Reviewed_By
Reviewed by: Michelle Navarro, Interim Chief Financial Officer, (213) 922-3056
