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VTA Redeems Trust Certificates, Saving $5.4 Million

San Jose, Calif. – On September 2, the Santa Clara Valley Transportation Authority (VTA) redeemed $26.5 million in outstanding variable rate debt, resulting in an estimated $5.4 million in budgetary savings related to interest expense and associated fees through 2015.

Earlier this year, Ambac Assurance Corporation, the insurance firm which VTA issued its bonds, was downgraded by one or more rating agencies due to potential financial losses resulting from insuring investment transactions built around subprime mortgages.  This prompted VTA to refinance other variable rate bonds with its excellent credit standing, saving over $690,000 in the first month after the bond refinancing. 

“The importance of redeeming these VTA sales tax revenue bonds was to avoid the higher interest rates that could result if Ambac is downgraded any further and current investment yields continue to be less than the cost to keep these funds outstanding,” said Joseph Smith, VTA’s Chief Financial Officer. 

The cost to redeem the last of the insured variable rate bonds by Ambac, the 1985 Equipment Trust Certificates, was $26.5 million, funded by a combination of funds held in a Debt Reserve Fund and the VTA Enterprise Debt Reduction Fund.

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About VTA
Santa Clara Valley Transportation Authority (VTA) is an independent special district responsible for bus, light rail and paratransit operations; congestion management; specific highway improvement projects; and countywide transportation planning. As such, VTA is both an accessible transit provider and multi-modal transportation planning organization involved with transit, highways and roadways, bikeways and pedestrian facilities.

For more information about VTA services, call VTA Customer Service at (408) 321-2300, (408) 321-2330 (TDD only). Or, log on to www.vta.org.