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Washington Metropolitan Area Transit AuthorityFY 2009 Comprehensive Annual Financial ReportNotes to Basic Financial StatementsJune 30, 2009 and 2008(6) Bonds Payable and Other Debt (Continued)(c)Issuance and Refunding of Debt (Continued)On November 20, 2003, the Authority issued $35,640,000 of Series 2003B Gross Revenue TransitBonds, with an average interest rate of 4.1 percent, to accelerate the Authority's VerticalTransportation Modernization Program and other capital projects.The Authority refunded the A, B, C, D and E Series Transit Bonds to reduce its total debt servicepayments over the next 20 years by approximately $288,000,000 and to obtain an economic gain(difference between the present value of the debt service payments on the old and new debt) ofapproximately $4,700,000. The Authority partially refunded the Series 1993 Gross Revenue TransitRefunding Bonds to reduce its total debt service payments over the next 10 years by approximately$13,000,000 and to obtain an economic gain of approximately $1,697,000. As of June 30, 2009 and2008, the unamortized cost of refunding the bonds was $2,013,000 and $2,510,000, respectively.This unamortized cost relates primarily to the call premium on the Series E Transit Bond, and the Series1993 Gross Revenue Transit Refunding Bonds, which are being amortized over the life of theoutstanding bonds.On June 9, 2009, the Authority issued $242,675,000 of the Series 2009A Gross Revenue TransitBonds, with an average interest rate of 4.67%, to retire a portion of the Commercial Paper NotesPayable. The Authority also issued $55,000,000 of the 2009B Gross Revenue Transit Bonds, with anaverage net interest of 4.79%. The 2009B Funds will be used to finance Capital Cost components forthe Authority's Metro Matters Programs.The American Recovery and Reinvestment Act of 2009 created the Build America Bond (BAB) program,which authorizes state and local governments (Municipal Issuers) to issue BABs as taxable bonds in2009 and 2010 to finance any capital expenditures for which they otherwise could issue tax-exemptgovernmental bonds. The Municipal Issuers receive a direct federal subsidy payment for a portion oftheir borrowing costs on BABs equal to 35 percent of the total coupon interest paid to investors.(d) Commercial Paper Notes Payable, Series APursuant to the Compact and the Note resolution of the Authority, Commercial Paper Notes, (Series A)were issued during fiscal year 2008, these Notes were repaid in fiscal year 2009. The Series A Notesactivity for the year ended June 30, 2009 was as follows (amounts in thousands):BeginningBalance Issued RedeemedEndingBalanceCommercial Paper Notes,Series A $330,000 $4,274,200 $4,604,200 $ oThe Series A Notes are authorized to be issued and reissued from time to time in denominations of anyintegral multiple of $5,000 equal to, or, in excess of $100,000 and to mature no later than 270 daysfrom the respective dates of issuance. The maximum principal amount of Series A Notes currentlyauthorized to be outstanding at any time is $330,000,000. The principal and redemption price of andinterest on the Series A Notes are special obligations of the Authority payable solely from and securedsolely by the funds pledged pursuant to the Note Resolution including the proceeds of sale of Series ANotes and Gross Revenues of the Authority. Such pledge of Gross Revenues is subject and subordinateto pledges securing certain outstanding and future indebtedness of the Authority. The Series A Notes39
Washington Metropolitan Area Transit AuthorityFY 2009 Comprehensive Annual Financial Report(6) Bonds Payable and Other Debt (Continued)Notes to Basic Financial StatementsJune 30, 2009 and 2008(d)Commercial Paper Notes Payable, Series A (Continued)are further secured by an irrevocable direct pay letter of credit issued by a major national bank. Theissuance of Series A Notes does not constitute a debt or legal obligation and will not create a lien uponthe revenues of the participating jurisdictions or the Federal Government or Federal Governmentagencies.(e)Lines of CreditPursuant to the Compact and the Line of Credit Resolution of the Authority, a 364 day Line of Credit for$100,000,000 was secured during fiscal year 2008. This Line of Credit was renewed on June 1,2009. The note is due and payable in consecutive monthly payments of accrued interest onlycommencing on July 1, 2009. All principal and accrued interest, computed based on the LondonInterbank Offered Rate (L1S0R), plus a certain margin, will be due and payable on May 26, 2010. TheL1S0R rate, was 0.32 percent and 2.46 percent for June 30, 2009 and 2008, respectively.For the year ending June 30, 2009 and 2008, the outstanding debt on both the Lines of Credit was $0and $40,000,000 respectively.(f)Interest ExpenseInterest expense on bonds for the years ended June 30, 2009 and 2008 was $7,244,000 and$7,654,000, respectively.Fiscal year 2009 interest expense for Series A Notes and the line of credit were $4,925,000 and$1,031 ,000 respectively.Fiscal year 2008 Series A Notes and line of credit interest expense were $7,763,000 and $46,000,respectively.Capitalization cost for fiscal year 2009 Series A Notes and the line of credit was $4,159,000 and fiscalyear 2008 with capitalization cost Series A Notes only, was $5,884,000.(7) Termination BenefitsThe General Manager may authorize a general reduction, in the work force, which is accomplished by areduction in positions and may result in the termination of personnel. This course of action is approvedby the Authority's Soard of Directors and outlined in the Authority's Personnel Policies and ProceduresManual, which details the basis for severance pay to be made to employees subject to a reduction-inforce.The financial statements of the Authority contained a liability and expense of $700,065 and$744,080, representing benefits to be paid to employees affected by a reduction-in-force implementedin the fiscal years ended June 30, 2009 and 2008, respectively.40
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