Meeting_Body
FINANCE, BUDGET AND AUDIT COMMITTEE
JANUARY 15, 2026
Subject
SUBJECT: MEASURE M PROGRAM
Action
ACTION: AUTHORIZE MEASURE M SHORT-TERM BORROWING PROGRAM
Heading
RECOMMENDATION
Title
ADOPT a resolution that authorizes the Chief Executive Officer to:
A. ESTABLISH the Measure M Short-Term Borrowing Program (Attachment A); and
B. EXECUTE and deliver all necessary documents related to the Measure M Short-Term Borrowing Program to enter into revolving credit agreements (Attachment B).
(REQUIRES SEPARATE, SIMPLE MAJORITY VOTE OF THE BOARD)
Issue
ISSUE
Metro is focused on ensuring delivery of the transit capital and highway projects set forth in the Measure M Expenditure Plan. Large capital project costs and timing are subject to change and difficult to predict. The establishment of the Measure M short-term borrowing program will provide interim taxable or tax-exempt financing until grant reimbursement or other funding sources, including proceeds from Measure M bonds or TIFIA loans, are received.
Background
BACKGROUND
Metro’s Long Range Transportation Plan assumes the use of short-term borrowing and long-term bonds to deliver Measure M capital projects. The proposed $500 million short-term borrowing program, which will include a combination of Commercial Paper (“CP”) and revolving credit facilities, will provide flexible, low-cost financing to bridge gaps between future revenues and near-term expenses. Similar short-term borrowing programs have been utilized successfully for Prop A, Prop C and Measure R, and offer flexible, low-cost financing alternatives that support prudent and effective debt management. Without this program, Measure M projects could face potential delays until sufficient funds or bond proceeds are available. Historically, delays lead to higher labor costs and material price increases, resulting in unfavorable budget impacts.
CP is a short-term debt instrument that can be issued with maturities from 1 to 270 days. As notes mature, new notes are simultaneously issued (i.e. “rolled over”). CP requires a Letter of Credit (“LOC”), which provides guaranteed liquidity to investors when their notes mature. Additionally, the LOC provides a safety net to Metro in the form of a term loan in the unlikely event the notes cannot be remarketed, protecting Metro from incurring an obligation to immediately repay the entire amount of maturing CP Notes using funds on hand. The CP will be backed by a subordinate pledge of Measure M sales tax revenues less 16% for net local return programs and 1% of gross administrative fees. Metro can issue either tax-exempt or taxable CP under the Measure M CP program.
A revolving credit facility is an alternative to CP that has similar benefits. A revolving credit facility is a direct loan from a bank, at a rate that will float based on an index plus a spread, which is generally reset every month. In addition, a fee is charged for the unutilized amount of the facility. As a floating-rate borrowing that may be drawn over time, it is similar to a CP program for practical purposes, but because the borrowing occurs directly from a bank no ratings or broker-dealer fees are required.
Discussion
DISCUSSION
The Resolution (Attachment A) authorizes access to a combination of vehicles, providing flexibility to structure the program according to the availability of credit and cost, while meeting the covenants in the trust agreement.
In addition, Metro’s Municipal Advisor, Montague DeRose & Associates (“MDA”), submitted a request for proposals (“RFP”) to 13 financial institutions to provide revolving line of credits, direct pay letter of credits to support commercial paper, and alternative products for a term out period between 3 to 5 years. The RFP required banks to have short-term ratings of at least P-1, A-1 or F-1 from at least two of the three following rating agencies: Moody’s Investors Service, Standard & Poor’s and Fitch Ratings, as is standard practice and required by Metro’s Debt Policy.
Evaluation criteria included pricing, any rate penalties that investors may impose on a particular bank, the status of a bank’s credit approval, and the bank's willingness to execute the form of agreement. Overall program objectives include low cost and maximizing access to borrowing capacity achieved through diversification of products and providers. The selection group was comprised of Metro’s Treasury staff and MDA. The selection group ranked each proposer and recommended revolving credit facilities from Wells Fargo Bank, N.A. (3-year term) and PNC Bank, N.A. (3-year term) (See Attachment C). Costs will vary depending on the amount of tax-exempt and taxable debt Metro issues under the Measure M program. Additional fees and interest may be incurred under certain extreme circumstances.
Furthermore, in accordance with Section 8(i)(C) of the Measure M Ordinance, the Measure M Independent Taxpayers Oversight Committee of MTA (“Measure M Oversight Committee”) is required to find that the benefits of the proposed financing for accelerating project delivery, avoiding future cost escalation, and related factors exceed issuance and interest costs. The Measure M Oversight Committee made the finding of benefit at its December 3, 2025, meeting, Attachment D.
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
Funding for the Measure M programs are included in the FY2026 budget in Cost Center #0521, Treasury Non-Departmental, under project #670301, task 01. The cost center manager and the Chief Financial Officer will be accountable for budgeting the cost in future years.
Impact to Budget
The funding sources of Measure M 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 M. The capital projects include highway improvements and expansion, bus operations and maintenance, transit and rail improvements and upgrades, airport connections, and bike and pedestrian connections. The financing will also help keep senior, student and disabled transit fares more affordable and reduce congestion. The resolution finds that the benefits from acceleration of projects exceed the issuance and interest costs of the proposed debt financing.
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 elect not to authorize a short-term borrowing program. This action is not recommended because a flexible tool to manage cash flow will facilitate delivery of the Measure M program.
Next_Steps
NEXT STEPS
Staff will negotiate final terms and conditions with the bank letter of credit and revolving credit facilities providers, as well as,
prepare and execute the Short-Term Program Documents (see Resolutions, Attachment A and B).
Attachments
ATTACHMENTS
Attachment A - Measure M Short-Term Borrowing Program Resolution
Attachment B - Authorizing Resolution
Attachment C - Bank Recommendation Summary
Attachment D - Measure M 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: Anelli-Michelle Navarro, Interim Chief Financial Officer, (213) 922-3056
