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MDOT projects higher FY27 debt service amid large planned issuances; agency cites strong credit ratings
Summary
DLS told the subcommittee Maryland Department of Transportation debt‑service will rise to roughly $452.9 million in FY27, with significant planned bond issuance including GARVEE financing for light‑rail modernization; MDOT highlighted recent bond sales, a $500 million refinance and continued compliance with statutory coverage ratios.
The Department of Legislative Services reported to the House Appropriations Committee’s Transportation and the Environment Subcommittee that Maryland Department of Transportation debt‑service obligations are projected to increase in fiscal 2027 and that the department maintains coverage ratios within statutory and administrative limits through the forecast period.
DLS analyst Samuel Quist summarized the analysis, saying the FY27 debt‑service budget increases by $33.7 million (about 8%) to $452.9 million. The analysis noted no new bond issuances in FY23–24 followed by larger issuances in FY25 ($200 million), FY26 ($345 million) and a projected FY27 issuance of $785 million. The debt outstanding is projected to rise toward $4.0 billion by 2031, though DLS projected coverage ratios will remain in compliance, with tighter administrative margins approaching 2031.
Quist highlighted GARVEE bonds (grant anticipation revenue vehicles) as a planned financing tool: state statute allows GARVEE maturities of 15 years and caps outstanding GARVEE debt at $1 billion. DLS noted the 2026 Consolidated Transportation Program includes a $1.4 billion light‑rail modernization program and that MDOT plans to finance approximately $643 million of that program with GARVEE issuances (a draft plan starting with a $275 million tranche in FY27 and a $368 million tranche in 2031).
Acting Secretary Katie Thompson said MDOT ‘‘has a long history of strong financial management as evidenced by its credit ratings of AAA from S&P, Aa1 from Moody’s and AA+ from Fitch’’ and described recent bond market activity: two bond sales ($200 million at a 3.81% true interest cost and $345 million at 3.43%) and a $500 million refinance that she said yields approximately $18 million in debt‑service savings over seven years.
Committee members asked about how the department will manage tighter coverage ratios toward 2031. MDOT officials said they will continue monitoring and using available tools, and the committee discussed a separate bill that would raise the Transportation Authority bond limit to allow full forward funding of the Francis Scott Key Bridge without sacrificing other projects.
DLS recommended annual budget language to set a debt‑outstanding limit for FY27 and two reports on nontraditional debt that would be due with the September and January financial forecasts. MDOT officials concurred with the DLS recommendations during the hearing.
