BRADENTON, Fla. — Seven months after the largest oil spill in U.S. history, the credit ratings of state and local government bond issuers in the Gulf Coast region have remained stable, according to Moody’s Investors Service.
Moody’s said potential damaging affects on employment, property values, and tourism in the impacted states — Louisiana, Mississippi, Alabama, and Florida — appear to be offset by BP’s cleanup efforts and reimbursements to the region.
“While some issuers have faced a negative impact on certain revenue streams due to the spill, credit pressures are manageable and not likely to be of a long-term nature,” said analyst Kristin Button, author of a special report on Gulf Coast credits.
Button said no evidence of material deterioration in credit quality has been seen to date and no rating changes have occurred due to the spill with the exception of the Santa Rosa Bay Bridge Authority, which operates Garcon Point toll bridge in north Florida.
Although the SRBBA was already rated well below investment grade at B3, Moody’s said it lowered the rating to Caa3 in August due to projections that the debt-service reserve fund would be depleted in coming months. It cited declining traffic levels due to the oil spill and slow recovery from the economic recession.
A special meeting of the bridge authority has been called for Wednesday but an agenda was not available at press time. The agency has $115 million of debt outstanding but toll collections have never been sufficient to pay debt service without dipping into reserves, which are expected to be exhausted following January’s payment.
The SRBBA on Wednesday may discuss a recent recommendation by the consulting firm URS Corp. to institute a 7.1% toll hike on Jan. 1. The increase was postponed from July due to the oil spill’s impact on traffic. In a letter recommending the Jan. 1 toll hike, URS said the major impact on traffic attributable to the oil spill occurred in July and August and was “near zero” in September. The authority has discussed filing a claim with BP.
An estimated 4.9 million barrels of oil spilled into the Gulf of Mexico near the Louisiana coast after the April 20 blowout of a BP-leased well. The flow of oil into the Gulf was stopped on July 15 but the well was not permanently sealed until Sept. 17.
The subsequent disaster closed 88,522 square miles of the Gulf to fishing and tainted beaches from Louisiana to north Florida. Currently, 1,041 square miles surrounding the wellhead remains closed to fishing.
Moody’s analysts were concerned that local populations could decline if residents were forced to relocate to find employment and there could be affects on key revenues, including property taxes, utility charges, and state school district funding.
Button said Moody’s found no significant out-migration of population and “key revenues have remained relatively stable for the rated issuers in the region.” Sales tax revenues have been the most affected with some issuers posting declines, but Moody’s expects the declines to be offset to a meaningful degree by BP reimbursements.
Of more than 735 local and state governments submitting claims to BP, about 528, or 72%, have been paid or approved, according to Moody’s. Of the governmental claims so far, $109.4 million in payments went to Alabama, $122.5 million went to Florida, $353.9 million went to Louisiana, and $120.4 million went to Mississippi.
Moody’s ratings are Aa2 for Louisiana, Aa2 for Mississippi, Aa1 for Alabama, and Aa1 for Florida — all with stable outlooks.
