In my most recent column, I wrote about the following three thought-provoking news reports on Maryland’s bond ratings and fiscal policies that merit immediate attention of Governor Moore and the leadership of the General Assembly:
- Decisions by Moody’s to downgrade Maryland’s fiscal outlook from stable to negative for the first time since 2011.
- Unanswered questions on how to address structural state budget deficits driven in large part by state funding obligations for the Blueprint for Maryland’s Future.
- The potential for Maryland to experience similar outcomes to those recurring in Delaware where businesses have relocated or are planning to relocate their Delaware incorporation after concluding that state has a hostile to business environment.
Now comes the unwelcome news that Standard & Poors Global Ratings (S&P) has issued a negative outlook for outstanding revenue bonds issued by the Maryland Transportation Authority (MDTA).
Since 1971, MDTA has been responsible for building, operating, improving Maryland’s toll facilities, and financing new transportation projects.
Currently MDTA operates, maintains, and collects tolls on the Fort McHenry Tunnel, Harbor Tunnel, Chesapeake Bay Bridge, Hatem Memorial Bridge, Gov. Harry W. Nice/Sen. Thomas “Mac” Middleton Bridge, Millard Tydings Bridge, and Maryland Route 200, aka the Intercounty Connector highway in Montgomery County and Prince George’s County.
MDTA is also in charge of the massive job of rebuilding, reopening, and operating the Francis Scott Key Bridge that will, at some point, once again connect Anne Arundel County and Baltimore County.
While Standard & Poors recently reaffirmed MDTA’s current AA bond rating, they also downgraded its outlook on MDTA’s bond rating from stable to negative. They warned of the potential for future changes, in part due to S&P’s uncertainty over the costs of building the Key Bridge replacement.
These costs have been estimated to be at least 1.8 billion dollars.
Funding sources for those replacement costs are uncertain, especially if the Trump administration continues to aggressively pursue further reductions in federal government spending.
What if only some or none of the $ 1.8 billion promised by former President Biden for bridge replacement will ever be delivered by the federal government?
Such an outcome is possible given a Republican President and a Republican Congress.
In any event, S&P does not foresee raising the recently reaffirmed AA bond rating upward “given MDTA’s relatively high debt burden and additional borrowing plans.”
Conversely, S&P has warned there is “at least a one-in-three chance they could lower the rating within the two-year outlook based on final costs to replace the Key Bridge along with MDTA’s s $5.1 billion capital improvement program.”
Currently MDTA has $2.1 billion in outstanding debt. In fiscal 2026, which begins July 1, 2025, that debt amount is expected to “increase significantly” to $2.6 billion, according to an analysis of the General Assembly’s nonpartisan Department Legislative Services.
That analysis projects outstanding MDTA debt will increase to $3.3 billion in fiscal 2027, before peaking at $3.8 billion in fiscal years 2029 and 2030.
Those amounts are slightly less than that provided for in MDTA’s statutory authority on a borrowing cap.
To date, MDTA seems unconcerned by these negative news reports.
An MDTA spokesperson has said, “The agency will continue to meet its debt payment obligations despite the loss of the Key Bridge and temporary loss of associated revenues, the MDTA expects to remain in compliance with all board directed financial policies and trust agreement covenants.”
One has to ask — Is that based on rigorous analysis or wishful thinking?
I predict all the above news will result in Governor Moore calling a special session of the Maryland General Assembly well before the next regular session convenes in January 2026.
If and when a special session is held this year, Governor Moore and the leadership in the General Assembly have a responsibility to every Maryland taxpayer.
That responsibility is simple and achievable.
Collectively and individually, they need to acknowledge, understand and respect the observations in all of these bond rating reports.
They need to give special attention to Moody’s report, which includes the following: “The negative outlook incorporates difficulties Maryland will face to achieve balanced financial operations in coming years without sacrificing service delivery goals or adding to the weight of the state government’s burden on individual and corporate taxpayers.”
It is imperative that in any special session and in future regular sessions, decisions on state spending levels, spending cuts, new taxes, tax increases, new fees and fee increases be based solely on economic realities.
David Reel is a public affairs and public relations consultant who lives in Easton.
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