Amid Caltrain shutdown talk, S&P says debt service solid for now

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Despite recent talk about a financial crisis that may force the shutdown of the commuter train line linking San Francisco and San Jose, S&P Global Ratings said that Caltrain's parent entity has the money to pay farebox-backed debt service at least in the short term.

Earlier this week the Board of Supervisors in San Francisco — one of three counties making up the agency that runs Caltrain — chose not to vote on a sales tax ballot measure that would have given the system a dedicated revenue source for the first time.

Caltrain train leaving San Francisco in 2009
Ridership on Caltrain, the commuter rail line between San Francisco and San Jose, is down 95% amid the pandemic.

The Peninsula Corridor Joint Powers Board receives more than 70% of its revenues from its riders and ridership has been down about 95% from April onwards due to the spread of COVID-19 and its impact.

In the last few days several local news outlets have run stories about the possibility of Caltrain shutting down, at least temporarily.

On Friday S&P Director Paul Dyson and Associate Director Scott Shad said the board had significant cash on hand to make the debt service payments in the near term. Shad said the PCJPB had received federal CARES Act money that could be used for debt service or operating funds. The PCJPB had $50 million in liquidity in 2019, Shad said.

“Long-term there’s uncertainty, depending on how this plays out,” Shad said.

S&P put the PCJPB’s bonds A-plus rating on negative rating watch on April 30. On Friday the analysts declined to say when they expected to resolve the rating watch.

In response to an inquiry about PCJPB’s intention to continue paying its debt, a spokesman texted, “We’re current on our debt service, as the CARES Act has backfilled all of our lost revenue to date.”

According to KRON’s news website, earlier this week San Francisco Supervisors Aaron Peskin and Shamman Walton chose not to introduce a proposed eighth of a cent sales tax proposal.

To reach the ballot, where it will need two-thirds supermajority approval, the measure needs to be approved by elected officials in all three counties served by Caltrain: San Francisco, Santa Clara and San Mateo. It is expected to generate $100 million per year of revenue for Caltrain, whose funding is subject to voluntary cooperation between the often squabbling counties.

Peskin this week complained that San Mateo County has too much control over the system.

In a January report, Moody’s Investors Service said that PCJPB had for credit strengths: well-off ridership, stable ridership, recently increased local government subsidy, and low debt burden. For credit weaknesses it noted that the board operates dependent on one-year government extensions of an elapsed agreement and debt service coverage by net operating revenues (after expenses) would likely remain around 1.0 times. Moody’s rates the debt A1 with a stable outlook.

The S&P analysts said that PCJPB had $72.6 million debt outstanding, of which $47.6 million was farebox revenue bond debt. The balance is a drawn line of credit.

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Revenue bonds San Francisco City & County County of Santa Clara, CA Coronavirus California
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