With more money than expected, Houston Metro pays off some debt

By Dug Begley, Houston Chronicle

HOUSTON — Metropolitan Transit Authority will end 2022 doing what a lot of people wish they could do: Paying down debt.

Board members of the transit agency earlier this month approved a plan using money from federal grants, excess tax revenue and investment income to pay off the entire $83.55 million commercial paper program owed by the agency. Commercial paper essentially acts as the agency's credit card, allowing it to tap money when it needs to cover expenses, which can then be paid off as Metro receives money from the federal government and the revenue from its one-cent portion of the sales tax in Harris County, Houston and 14 smaller cities.

"This is a good move," said board member Terry Morales, chairwoman of the Metro finance and audit committee. "We have the cash on our balance sheet and it is a good cash management move."

Officials had planned to pay off $20 million this year, rolling over the remaining $63.55 and spreading the repayment over the next five years. Instead, Metro's interim chief financial officer, George Fotinos, proposed using available funds to pay off the sum. The early payoff could save the agency between $10.9 million and $14.9 million based on current interest rates.

"Every dollar we save is more money to invest in our operations and our capital build-out," Metro chairman Sanjay Ramabhadran said.

The rate Metro pays for borrowing can vary, based on financial conditions. Recently, interest rates have increased, Fotinos told Metro officials, making an early payoff warranted.

A combination of federal aid and conservative tax revenue estimates have led to Metro easily balancing its books. Since 2020, the agency has received nearly $700 million in federal aid aimed at allowing transit to operate during the pandemic, nearly $30 million more than it budgeted in local sales tax revenue and $12 million in interest payments on its own investment funds.

Coupled with cutbacks in service because of a lack of transit demand during the pandemic and some slowdown returning routes to regular service as Metro struggled to hire new drivers and mechanics, the agency has ample funds, based on monthly financial reports — even as it prepares for a building boom related to the $7.5 billion long-range transit plan voters approved in 2019 to add 75 miles of bus rapid transit and new light to Hobby Airport.

That surplus has led some to suggest various options to offer relief to riders. Arthur Smiley, the agency's former chief financial officer who retired earlier this year, suggested the board consider both a year-round program offering free rides for K-12 students — they now pay half price — and a reduction of all Metro fares to $1, a discount of 25 cents, for the next two years.

"It would benefit all riders," Smiley told officials on Nov. 17.

___

(c) 2022 the Houston Chronicle

Visit the Houston Chronicle at www.chron.com

Distributed by Tribune Content Agency, LLC.

Daily News Briefing