Globe: MBTA to propose revamping debt, ending costly ‘swaps’
Shortsleeve is due to present a plan to the fiscal control board to basically refinance some of the T's debt and save up to $235 million over the next decade. Apparently the T has $437 million worth of debt financed through interest rate swaps with UBS and Deutsche Bank. These were taken out years ago as a hedge against rising interest rates, but rates have been hovering pretty close to zero for about 8 years now and don't show any signs of coming back up any time soon. As a result, the T is paying up to 5% annually on some of these deals when they could be paying much less by simply selling bonds. The T will have to pay up to $78 million to break the contracts, but should make it up in reduced interest payments. The Globe article, unsurprisingly, doesn't get as far into the weeds on the terms of these swaps as I would like, but this definitely sounds like a good, prudent move by Shortsleeve.
The T is also planning to put some of their debt out for competitive bids for the first time in "at least a dozen years". Why they haven't been doing that all along, I don't know...
This article, coupled with the
profile of Shortsleeve the Globe is currently running, certainly paints the guy as the grownup in the room fixing the mismanagement of the previous leaders. If it's true that in his first nine months he "cut the T’s operating deficit by $138 million, or 43 percent" through "reduced spending on overtime pay, materials, and services, and increased revenue from advertising and real estate", that's pretty impressive.
Obviously, this "grownup in the room" narrative is exactly what the Governor is pushing, but from what I've seen there is truth to it. I don't doubt for one second that past managers of the T haven't been on the ball on issues like finance, payroll management, and
procurement, and the T has been wasting tens of millions every year as a result.