DALLAS - The North Texas Tollway Authority is all but certain to raise tolls to preserve its debt-service coverage after revenues for 2009 fell by nearly 11%, officials indicated yesterday.
Although the NTTA's finance committee yesterday postponed a decision on whether to raise tolls nearly 32%, the committee is considered likely to approve the hike next week. Final approval of the higher tolls would come in a meeting of the nine-member authority board in July.
Under its bond covenants for the $5 billion State Highway 121 toll project, the NTTA is required to hike tolls to maintain its debt-service ratios. Those ratios are also key to maintaining an A-category credit rating, which was a critical concern in the agency's financing plan.
Currently, the NTTA has an A-minus rating from Standard & Poor's on its $5.1 billion of first-tier toll revenue bonds with a BBB-plus on $1 billion of second-tier bonds. Moody's Investors Service rated the first-tier bonds A2 and the second-tier debt A3 in advance of an issue last fall. The authority dropped Fitch Ratings in 2007 when it dropped the senior-lien bonds one notch below the A-category.
Although its bonds have all been issued for the SH 121 project, the NTTA needs the ability to issue more bonds for another toll project whose bonds will not be backed by system revenues. The new SH 161 would be self-financing and would be the first toll project not backed by system-wide revenues.
System-wide revenues are falling at a 10.9% rate, board members were told at an administration committee meeting on Monday. To prevent shortfalls, the committee cut spending by $108 million. The cuts came in the capital improvement, reserve maintenance and feasibility study funds.
"We will continue to monitor the situation and make adjustments where necessary," said NTTA's executive director Allen Clemson. "Despite the reduction, projects such as the Lewisville Lake Toll Bridge, Eastern Extension of the President George Bush Turnpike and construction on the Sam Rayburn Tollway will remain on schedule. We will also continue serving our customers and working hard to meet our commitments to the region."
The cutbacks mean the NTTA is not planning to issue bonds for $82.5 million in improvement projects and is delaying a $35 million study on the controversial Trinity tollway, a turnpike that would run inside the levees of the Trinity River in downtown Dallas, requiring extraordinary engineering studies and adjustments. Voters in 2007 failed to win passage of a Dallas initiative that would have killed the tollway.
In a special report issued last week, Fitch analysts saw signs that the decline in toll revenues may be slowing.
"Given the depth of the economic downturn, Fitch's base case expectation is for traffic to be down in 2009, albeit at a smaller percentage than 2008, no growth in 2010, and limited growth beginning in 2011," the report stated. "Performance in the sector currently indicates that through what may be the deepest part of the recession, pressure on credit quality remains."
For the NTTA, the downturn came just as it was starting the most ambitious expansion of its toll-road system ever, more than tripling its debt. In competition with a private developer, the authority outbid the consortium of CintraJPMorgan that had already been awarded the SH 121 project.
Officials professed confidence that the authority would be able to maintain its A-category rating, which would make the financing of the projects affordable.
The authority claimed an advantage over the private developer because it had access to the tax-exempt market. Since then, issuers with credits below AA-minus have been virtually sidelined by risk-averse investors and unavailability of private insurance at a cost that issuers can afford to pay.
