Joint committee backs plan to securitize state BRT funds to advance BRT 355 Central project

Mr. Kenny, a council staff presenter, told a joint session of the Government Operations and Fiscal Policy Committee and the Transportation & Environment Committee that the supplemental appropriation request (26‑13) would securitize approximately $168,000,412 of state BRT funding so the county could pursue about $191 million in long‑term bond financing for the BRT 355 Central project. He said the change would not alter the project’s total budget of $452 million but would allow Montgomery County Department of Transportation to pursue a more comprehensive progressive design‑build contract to speed delivery and reduce inflation risk.

Nancy Feldman, Department of Finance, told the committees: “These funds are not general funds.” Feldman said the state BRT revenues are recorded in the capital improvement fund and would be treated as non‑tax‑supported debt for spending affordability guideline purposes, though debt service is still disclosed in the county’s reporting to rating agencies. She said the county will engage a municipal advisor, use bond counsel in the next stage, and that the new in‑house debt manager, Joe Mason, will be involved in preparing the bond transaction.

Councilmember Katz asked whether the county’s AAA rating would be affected and urged an extra layer of independent assurance from consultants or rating analysts. Feldman and staff responded that the county has already disclosed the possibility of these bonds to rating agencies and that the structure relies on state BRT fund revenues subject to appropriation; they said previous issuances using similar flows (including stadium bonds) received investment‑grade consideration and that structuring tools such as contingencies or insurance could mitigate appropriation risk.

Staff also noted that the state created the BRT fund in 2022 and that a 2023 General Assembly provision allows jurisdictions to use those funds in bond structures. Mr. Kenny explained that the $168 million figure reflects $191 million in new long‑term financing less $22.6 million in previously approved state aid not needed to support the bonds. The staff recommendation included a technical amendment to the fiscal note to clarify that the source is the state BRT fund rather than exclusively lottery proceeds. The Equity Impact Assessment attached to the packet concluded this funding swap "neither advances nor impedes racial equity," because it is a timing/funding mechanism rather than a net change in project implementation.

Councilmember Belkin asked about timing and whether funds in question are for FY26 or FY27; staff said FY26 funds have been appropriated and that the bond issuance would align with the FY27 appropriation timeline, with bond transaction steps likely to take two to three months ahead of the state’s budget action. Staff warned that if the committee did not move forward with the supplemental appropriation, the county could face delays in signing a construction contract during the construction phase because full construction funding would not be available under a pay‑as‑you‑go approach.

With the technical amendment noted, the joint committee voted by hand raise to recommend the supplemental appropriation to the full council; the Chair stated the vote was unanimous. The recommendation is advisory to the full Montgomery County Council, and the actual bond issuance and bond resolution would be separate actions subject to further disclosure, third‑party advisor work and council review.