Delaware Memorial Bridge toll hike veto threatens bond plans

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Infrastructure investments planned by Delaware River and Bay Authority are in limbo after New Jersey Gov. Phil Murphy vetoed a toll increase that would have funded many of them.

The bi-state transportation agency encompassing New Jersey and Delaware was scheduled to implement a $1 toll hike on the Delaware Memorial Bridge in March before Murphy vetoed the measure Jan. 2.

The revenue from higher tolls would have supported the DRBA’s $440 million capital improvement plan through 2021, including two separate bond issuances totalling around $270 million.

“Without the additional revenue that comes with a toll increase, many infrastructure investment projects, including some at the Delaware Memorial Bridge, will be delayed or postponed indefinitely until the resources necessary to fund them are available,” the DRBA said in a statement after Murphy’s veto.

The DRBA relies solely on the collection of bridge tolls as well as fares and fees at its ferry operations and concessions. The agency receives no financial support from Delaware or New Jersey.

The Delaware Memorial Bridge, which links New Jersey and Delaware, generates 75% of the DRBA’s operating revenue and 100% of net revenues, according to the authority. The bridge is on the primary highway link between New York and Washington, D.C., connecting the New Jersey Turnpike with Interstate 95 in Delaware.

In a report Thursday, Moody’s Investors Service called the veto a credit negative for the DRBA because it negates $34 million in additional annual revenue. The agency’s bonds are rated A1 by Moody’s and A by S&P Global Ratings with stable outlooks.

Murphy cited a desire not to increase tolls for projects other than critical safety enhancements.

“Although the authority’s willingness to raise rates with support from its governing board has been well demonstrated, the recent toll rate veto signals political risks that constrain the authority’s ability to raise rates in a timely fashion to meet future obligations,” wrote Moody’s analyst Eriq Alexander. “The lack of government support for toll rate changes will continue to be an area of concern for future proposals as the failure to enact toll revisions will have a material impact on how the authority's senior management and board choose to manage long-term operating strategies and capital improvement initiatives.”

Alexander noted that without an enacted toll rate increase in place, the DRBA will likely face longer term constraints on unrestricted cash and investments, which was roughly $140 million or 600 days cash during the 2018 fiscal year. The authority will now have to form an alternative toll revision proposal that can receive approval from the New Jersey and Delaware governors or independently craft a new financing solution to tackle its capital needs.

“The loss of projected revenues will limit operating flexibility,” said Alexander. “DRBA's strong operating performance is expected to be at risk with the cancellation of needed capital improvements and scheduled debt issuance.”

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