Sound Transit has executed the sale of $477 million in green bonds that will help fund voter-approved regional transit projects, including work to continue building more than 90 miles of voter-approved light rail extensions.
“Every dollar we save in borrowing costs is one less dollar the taxpayers must pay to build our future transit system,” Sound Transit Chief Executive Officer Peter Rogoff said in a press release. “Borrowing at these historically low rates will also insulate us from potential market downturns in the future.”
The bond sale will generate proceeds to fund voter-approved transit expansions. The sale consisted of fixed-rate bonds at a total interest cost of 3.596 percent. The favorable rate is significantly lower than the 5.3 percent average over the last 30 years.
In issuing the new bonds following last month’s passage of the Sound Transit 3 ballot measure, the agency received a rating upgrade from Moody’s for its most senior bonds (Prior Bonds) from Aa1 to its highest AAA rating. Moody’s also upgraded the agencies prior bonds, including the $477 million bond sold this week, from Aa1 to Aa2.
The sale represents the second sale of green bonds by Sound Transit, the largest issuer of municipal green bonds in the country.
Green bonds are a rising trend in the financial industry that offers investors the ability to invest in bonds that advance environmental sustainability. Sound Transit’s credibility as a green bond issuer derives in part from its construction and operation of transit services that are more sustainable than other transportation options. The agency observes formalized and independently monitored sustainability commitments across many areas of day-to-day business, from designing energy-efficient buildings to reducing fleet emissions to increasing recycling and composting.
The bond issuance is fully compliant with International Capital Market Association (ICMA) Green Bond Principles 2016 and validated through an independent opinion commissioned from Sustainalytics, a provider of environmental, social and governance (ESG) research and analysis that assesses the robustness and credibility of Green Bonds. The firm concluded that “Central Puget Sound Regional Transit Authority’s green bond framework is credible and robust and provides clarity regarding the outcomes of the green bond investments.”
In addition to annual reviews by the American Public Transportation Association, each year independent auditors evaluate Sound Transit’s compliance with International Organization for Standardization environmental management system criteria (ISO 14001).
Marketing green bonds is still a relatively new development in the financial sector. Environmental advocates have called for expanding it, with moves toward increasingly rigorous protocols. The ICMA Green Bond Principles are widely considered the prevailing standard. While the green bond designation does not necessarily have a direct impact on the pricing of the bonds, a growing number of issuers use the designation to promote awareness of their projects and expand their investor bases.
The underwriting team of this bond sale includes Citigroup; Goldman, Sachs and Co; BofA Merrill Lynch; J.P. Morgan; RBC Capital Markets; and Wells Fargo Securities.
Over the past 15 years, Sound Transit has developed a strong track record of delivering mass transit investments. The University Link light rail extension, with new stations on Seattle’s Capitol Hill and at Husky Stadium, open earlier this year, ahead of schedule and approximately $150 million under budget. The extension to Angle Lake opened this September one stop further south from the airport $40 million under budget.
In 2021, light rail service is scheduled to open to Northgate. By 2023 Sound Transit is on track to extend service further north to Lynnwood and east to Redmond’s Overlake area. The light rail extensions to the Federal Way Transit Center and downtown Redmond are scheduled to open a year later in 2024.Work will follow to extend light rail to Tacoma, West Seattle, Ballard, Everett, South Kirkland and Issaquah.