MDOT gets first credit ratings upgrade in 15 years, though with negative outlook

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The Maryland Department of Transportation has received its first credit rating upgrade in nearly 15 years, which Secretary Paul Wiedefeld said will lower borrowing costs and save taxpayers money.

The department, though, also received a negative outlook to match the state’s forecast, indicating that its credit rating may be downgraded in the near future. Maryland’s general operating budget, similar to its transportation plan, is facing projections of a multibillion deficit in the coming years.

The credit agency Moody’s recently upgraded the department’s rating for bonds that officials issue to pay for transportation projects, infrastructure maintenance and more. The department has about $3 billion in outstanding bond debt.

The triple-A rating from Moody’s marks the department’s first credit rating increase since 2010 and puts the department’s debt at the same rating as the state’s general obligation debt, which officials use to buy land, build government facilities and approve grants for a variety of institutions, including schools and hospitals.

“This upgraded rating reflects Moody’s confidence in the strong financial management practices of the department and will result in lower borrowing costs and debt service savings for Marylanders,” Wiedefeld said in a recent statement.

The department has received a triple-A rating from Standard & Poor’s and a rating of AA+ from Fitch Ratings.

In its decision to boost the rating, Moody’s cited the state’s involvement in the department’s debt program, including regular revenue monitoring and forecast revisions, as a major factor for the upgrade, according to the department.

The department issues bonds to pay for its Consolidated Transportation Program, the state’s six-year capital budget for transportation spending.

Maryland repays the bonds with revenue from taxes on gasoline, vehicle titling, corporate income and vehicle rentals.

The department’s operating costs regularly outpace its revenue growth, but recent supply chain disruptions, the end of federal pandemic-era relief funding, rises in inflation and construction costs, and fewer federal dollars to match state spending have exacerbated annual shortfalls.

Declining revenue from taxes paid on gasoline and the rise of the electric-vehicle market have also dealt a blow to state and local transportation budgets.

Earlier this month, Wiedefeld and his team proposed deferring road projects across the state as part of a roughly 7% cut to the six-year transportation budget as part of a draft of the plan on which legislators will vote during the 2025 session.

Transportation officials proposed delaying construction for 16 state highway projects, deferring some sidewalk repairs and intersection improvements, and cutting from state-of-good repair funding to maintain state-owned and operated roads, transit and aviation infrastructure.

The cuts are expected to fill a $1.3 billion gap in the state’s $18.9 billion six-year transportation budget.

State lawmakers last session passed fees to infuse about $1.8 billion into the budget over the next six years, which included implementing a vehicle registration fee based on weight, an electric vehicle surcharge, ride-hailing fees and higher fines for speeding in work zones.

But the shortfall is expected to continue growing as revenue declines and costs rise further.