Meeting_Body
MEASURE R INDEPENDENT TAXPAYERS OVERSIGHT COMMITTEE
MARCH 9, 2026
Subject
SUBJECT: MEASURE R BONDS
Action
ACTION: MAKE A FINDING THAT THE BENEFITS OF A DEBT FINANCING EXCEED ISSUANCE AND INTEREST COSTS
Heading
RECOMMENDATION
Title
ADOPT a resolution (Attachment A) which finds, in accordance with Section 8(i)(4) of the Measure R Ordinance, that the benefits from the proposed financing for accelerating project delivery, avoiding future cost escalation and related factors exceed issuance and interest costs.
Issue
ISSUE
The Measure R Ordinance requires that the Measure R Independent Taxpayers Oversight Committee of Metro (“Measure R Oversight Committee”) “review all proposed debt financing and make a finding as to whether the benefits of the proposed financing for accelerating project delivery, avoiding future cost escalation, and related factors exceed issuance and interest costs”.
Background
BACKGROUND
To date, Metro has paid or plans to pay approximately $585 million in project costs, projected to be reimbursed by proceeds from long-term debt financing. This standard practice approach is a critical role of the treasury function and is utilized to avoid project delivery delays and ensure that Metro’s relationships with project delivery entities remains in good standing.
Discussion
DISCUSSION
The proposed issuance of $585 million of tax-exempt fixed-rate bonds (“New Money Bonds”) is needed to reimburse the previously paid or planned to be paid project expenses. This issuance would confer several benefits, including aligning the useful life of the assets with life of the debt, ensuring that the repayment schedule matches the period during which the assets provide value, and preventing the misalignment of short-term cash demands with long-term assets. The conventional reimbursement approach coupled with the management of cash balances is utilized to avoid project delivery delays and ensures that Metro’s relationships with project delivery entities remain in good standing. Degrading these relationships or delaying payments could result in project delays and future project cost escalation across Metro’s entire capital project portfolio. Further, current market conditions would allow Metro to take advantage of the difference in tax-exempt borrowing rates and investment yields that would reduce overall borrowing costs or improve financial efficiency.
Determination_Of_Safety_Impact
DETERMINATION OF SAFETY IMPACT
Approval of this report will not impact the safety of Metro's patrons or employees.
Financial_Impact
FINANCIAL IMPACT
The costs of issuance for the New Money Bonds will be paid from proceeds of the financing and will be budget neutral. The fund source for the New Money Bonds principal and interest expense will be Measure R 35% Transit Capital. Expenses for this financing will be included in future budgets as follows: bond principal, account 51101 and bond interest account 51121.
Impact to Budget
The funding sources of Measure R are eligible for bus & rail operations and capital projects.
Equity_Platform
EQUITY PLATFORM
Approval of this item is intended to reduce financial risk and provide funding for Metro capital projects financed by Measure R. The capital projects include new rail and bus rapid transit projects, Metrolink projects, Metro Rail system improvement projects, carpool lanes, highways and other highway related improvements, rail operations, bus operations, and for local return programs. The resolution finds that the benefits from acceleration of projects exceed the issuance and interest costs of the proposed debt financing. At this time, there are no equity concerns anticipated as a result of this action.
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
Absent the finding of benefit for the proposed New Money Bonds issuance, Metro may experience cash-flow pressures for ongoing projects while awaiting grant reimbursements or other funding sources. Additionally, the current payment sources would also remain misaligned with the useful life of the associated assets, potentially resulting in repayment inefficiencies. Finally, given current market conditions, Metro could miss the opportunity to reduce overall borrowing costs and enhance financial flexibility for other projects.
Next_Steps
NEXT STEPS
Treasury staff will request Metro Board authorization for the issuance of Measure R New Money Bonds in conjunction with Measure R Refunding Bonds. The Measure R Refunding Bonds will refund approximately $367 million of Measure R Senior Sales Tax Revenue Bonds, Series 2016-A, which become currently callable on June 1, 2026, to achieve debt service savings. Upon obtaining authorization, Treasury staff will obtain credit ratings for the New Money and Refunding Bonds, complete all legal documentation, and distribute the Preliminary Official Statement to potential investors while initiating pre-marketing efforts. Following this, the issuer will negotiate the sale of the New Money and Refunding Bonds with the underwriters. The New Money and Refunding Bonds are expected to be priced and delivered in April 2026.
Attachments
ATTACHMENTS
Attachment A - 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