Fitch Rates Triborough Bridge & Tunnel Authority's (New York) $158MM Revs 'AA'; Outlook to Negative.
--$158 million general revenue bonds series 2009B (federally taxable - issuer subsidy - Build America Bonds) 'AA'.
Fitch also has affirmed the following outstanding ratings of the authority:
--$6.5 billion general revenue bonds at 'AA';
--$2 billion subordinate revenue bonds at 'AA-';
--$150 million general revenue mandatory tender bonds series 2009A-1
Fitch has revised the Rating Outlook to Negative from Stable for all bonds. The series 2009B bonds are expected to sell competitively during the week of Sept. 7, 2009.
The Negative Outlook reflects the authority's increasingly constrained financial and operating profile, dependence on annual revenue growth of 4% or more over the medium term to support $400 million in historically essential annual transfers to the Metropolitan Transportation Authority (MTA), and an additional $1-$2 billion in debt for state of good repair needs that could erode coverage levels inconsistent with the current rating level. The current economic recession has reduced the underlying traffic base, which resulted in lower than projected yields on the 2008 toll increase, and similarly, Fitch expects the 2009 toll increase to yield less than anticipated. Management estimates that fiscal 2010 subordinate lien debt service coverage could fall to approximately 1.55 times(x) and is likely to remain there for an extended period given anticipated lower revenue yields, the nearly $100 million increase in annual senior lien debt service in 2010, and the potential for higher operating and maintenance expenses. Fitch expects higher than anticipated toll rate increases will be needed to service the operating needs, debt service requirements and transfers to the MTA with the additional $1-$2 billion in debt that is anticipated. In addition, significant toll rate increases and/or less capital spending could cause heightened political risks. The financial profile could stabilize should traffic rebound, revenue yields return to previous levels, and/or additional leverage be managed carefully.
The 'AA' and 'AA-' ratings reflect the essentiality and performance of the bridge and tunnel system (the system), which provides critical transportation links in the New York metropolitan area, the importance of the system to the economy of the New York region, a mature and relatively stable traffic base, and demonstrated ratemaking flexibility. Offsetting these strengths is the system's increasing dependence on sustained revenue growth to fund sizeable transfers to the MTA in support of its transit and commuter rail services. These transfers have left the authority with lower liquidity and a dependence on future borrowing to fund a large part of its capital plan. While the significant level of transfers to the MTA could be a risk, all resolution requirements of the authority's system are senior to this transfer.
The MTA is facing extreme financial pressure as a result of near-to-medium term operating and capital hurdles given the rapid decline in operating subsidies, primarily mortgage recording tax revenues and other regional tax sources due to the downturn in regional housing prices and the current national and regional economic downturn. In May 2009 state legislation was enacted which provided additional sources of revenue in the form of taxes, fees, and surcharges, as well as a toll increase of approximately 10% that took effect in July 2009. The MTA's July plan also included strict spending constraints and budget reductions which are projected to result in combined annual savings of $300 million starting in 2009. After deficit reducing actions and revised revenue projections, the July financial plan now estimates net cash surpluses at the MTA of $29 million and $39 million in 2009 and 2010, respectively. While Fitch views these actions and proposals favorably to counteract current financial pressure, they do not solve the MTA's longer term funding imbalance.
Effective July 12, 2009, the authority raised tolls by 10% and projects further increases of 7.5% in each of 2011 and 2013. These increases are on top of the $0.50 increase on the major bridges two tunnels and Henry Hudson Bridge and the $0.25 increase on minor facilities in March 2008. Toll rate increases have historically resulted in a short-term reduction in traffic with a significant positive impact on overall revenues. However, this did not occur in 2008 when vehicle crossings were down 3% and toll revenues only increased 1.9%. Year-to-date 2009 figures are trending similarly with traffic down 2.3% and revenues up just slightly by 0.1%.
The authority has historically produced consistently sound financial operations and has yielded approximately 10% increases in revenue on past toll increases. In fiscal 2008, the authority had a healthy operating ratio of 31% with senior debt service coverage of 2.51x and coverage on a combined basis at 1.75x. Management estimates that coverage in 2009 will remain robust but will fall to 2.40x and 1.74x, respectively. In fiscal 2010, senior debt service increases by 18% and coverage is expected to fall to 2.04x and 1.55x, respectively. Since the increase in annual senior debt obligations impacts each of the next 10 years, coverage will remain at or below these levels barring some combination of traffic and revenue growth. With an additional $1-$2 billion in debt, coverage would be pressured further.
The authority's approximate $1.2 billion 2005-2009 capital program continues longstanding efforts to provide for the state of good repair and normal replacement of the authority's facilities. The authority is a public benefit corporation placed under the governance of the MTA Board in 1968. The authority's toll facilities include the Robert F. Kennedy Memorial Bridge (formerly the Triborough Bridge), Verrazano-Narrows Bridge, Bronx-Whitestone Bridge, Throgs-Neck Bridge, Henry Hudson Bridge, Marine Parkway-Gil Hodges Memorial Bridge, Cross Bay-Veterans Memorial Bridge, Brooklyn-Battery Tunnel, and Queens-Midtown Tunnel. In addition, the authority owns the Battery Parking Garage.
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|Date:||Sep 3, 2009|
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