2008-07-11 22:40:09 -
- Fitch Ratings has assigned the following ratings to the Triborough Bridge and Tunnel Authority's, NY (TBTA):
--$650 million general revenue bonds, series 2008C 'AA';
--$350 million subordinate revenue bonds, series 2008D 'AA-'.
The bonds are expected to sell through negotiation during the week of July 14. In addition, Fitch has affirmed the following outstanding ratings for
the TBTA:
--$5.8 billion outstanding general revenue bonds 'AA';
--$2.1 billion outstanding subordinate revenue bonds 'AA-'.
The Rating Outlook is Stable. Bond proceeds will be used refund outstanding auction-rate securities (ARS).
The 'AA' and 'AA-' ratings are based on the very strong economic value of the TBTA's facilities and the system's significant financial flexibility. Coverage of its senior and subordinate bonds is ample on a net revenue basis, and the system produces sizable surpluses that are either reinvested in the TBTA facilities or transferred to the Metropolitan Transportation Authority (MTA) in support of its transit and commuter rail services. Fitch notes that the 2008C bonds are being used to free-up capacity for the MTA and that this decision is contrary to the TBTA's policy of issuing debt on behalf of the MTA. While this in and of itself does not have an impact, continued borrowing could negatively affect the rating.
Finances have remained strong and stable throughout New York's various economic cycles. Debt service coverage levels have rebounded since 2002 when the combination of lower net revenues, primarily due to increased security and insurance costs and E-ZPass tag replacement, and higher accrued debt service costs contributed to coverage ratios of 1.89 times (x) against senior debt service and 1.44x against combined senior and subordinate debt service. Reflecting the combined impact of the May 2003 and March 2005 toll rate increases as well as stable traffic levels since 2002, senior and subordinate debt service coverage in 2007 were strong at 2.89x and 1.93x.
TBTA toll revenues were generally flat in 2007 increasing to $1.25 billion from $1.24 billion, or 0.6%, and were slightly less than forecasted, reflecting limited traffic growth. In 2007, expenses grew to $369 million from $352.9 million, or 4.6%, primarily due to increased personnel costs associated with salaries, wages and pension costs. For 2008, total budgeted operating expenses are expected to increase to approximately $426.9 million, or 15.7%. Major maintenance and bridge painting account for the majority of the expected increases, growing to $215.9 million from $172.3 million, or 25%, while contractual step-up increases and inflation in labor-related costs are expected to rise to $210.9 million from $196.8 million, or 7.2%.
In March 2008, The TBTA raised cash tolls $0.50 on the major bridges, two tunnels and Henry Hudson Bridge while the minor facilities increased $0.25, three years after the last increase in March 2005. Toll rate increases have historically resulted in a short-term reduction in traffic with a significant positive impact on overall revenue. Preliminary, unaudited results for the first nineteen days in June 2008 show a 4.7% drop in vehicle crossings for the month from the same period last year, due to higher gas prices, weak economic conditions and higher gas prices. Also, while the authority initially estimated 2008 toll revenues to increase 1% over 2007 toll revenues, year-to-date May 2008 toll revenue was lower relative to budget by $2 million due to revenue shortfalls of 1%-3.5%. Given the accelerated toll increase, Fitch expects toll revenue to increase at approximately 4% in 2008. Based on preliminary 2008 budgeted revenues and expenses that have been adjusted for the issuance of all series 2008 bonds (A, B, C, and D), senior debt service coverage is expected to be 2.49x while combined senior and subordinate debt service coverage is expected to be 1.76x.
The MTA plans to reassess its financial plan by the end of July 2008 to incorporate the impact of lower than expected traffic, toll revenues, rising fuel costs, and recent forecasts for employment in the region. In addition, the MTA has already cancelled certain planned service enhancements which were scheduled to commence mid year and anticipates ending 2008 with a positive net cash balance, albeit lower than the level anticipated in the 2008 Adopted Budget.
Fitch expects the TBTA will continue its strategy of periodic toll rate increases to meet the authority's operating, debt service, and capital needs and to provide sufficient resources to the MTA's transit and commuter rail network. While the significant level of transfers to the MTA could be a risk, all resolution requirements of the TBTA's system are senior to this transfer. In addition, MTA and TBTA's toll rate setting strategy to provide sufficient surplus revenues to the transit and commuter rail system enhances debt service coverage. Issuing debt on behalf of the MTA weakens this enhancement.
TBTA's $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 TBTA is a public benefit corporation placed under the governance of the MTA Board in 1968. The authority's toll facilities include 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 TBTA owns the Battery Parking Garage.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings
Chad Lewis, 212-908-0886 (New York)
Emari Kotake, 312-606-2308 (Chicago)
Christopher Kimble, 212-908-0226
(Media Relations, New York)
