BRADENTON, Fla. — The Santa Rosa Bay Bridge Authority in the Florida Panhandle made its January debt-service payment, but its July payment is in doubt and most board members overseeing the credit have now resigned.
The Securities and Exchange Commission sent a letter to the board chairman Nov. 17 seeking numerous documents related to finances and disclosures.
The regulatory agency subsequently sent another letter to the board’s vice chairman, according to Morgan Lamb, the authority’s secretary-treasurer. Lamb is now believed to be the agency’s sole board member.
Board chairman Garnett Breeding and vice chairman Steve Burch both resigned before the end of last year. Resignation does not relieve board members of responsibility when it comes to an SEC inquiry, a market expert said.
On Monday, Lamb found out that two other board members resigned and another member would not attend future meetings because his term is expiring soon, Lamb said in an interview Wednesday.
A regularly scheduled meeting set for Jan. 19 is expected to be canceled, he said, because the volunteer six-member board no longer has the required quorum to meet.
After new members are appointed, future meetings will be posted on the authority’s website at www.garconpointbridge.com/New/update.htm.
Lamb, a retired industrial engineer and chairman of the local Republican Party, said he has no immediate plans to step down.
“Right now I’m hedging my bets and hoping something better will come of this,” he said. “I’ll stay on board and ride this out.”
The authority is a special independent district of the state that sold $75.5 million of Series A current interest bonds in 1996 that mature in 2028 and $19.4 million of Series B capital appreciation bonds maturing between 2005 and 2028.
Proceeds were used to build the 3.5-mile-long tolled Garcon Point Bridge, which has fallen short of forecast traffic levels since opening in May 1999. There is also a free alternate route for drivers to use.
The authority dipped into its dwindling pot of reserves in January — as it has most years since the toll bridge opened — for the $230,396 needed to complete a $2.36 million debt-service payment.
Trustee Bank of New York Mellon reported in a material-event notice Monday that the reserve balance currently is $2 million while the July 1 debt-service payment rises to just over $5 million to pay principal and interest.
The authority ordered a toll increase to take effect Jan. 1, but it is unclear how much that will contribute to the revenues needed to make the July payment. Lamb said there has been push-back on the toll hike.
“It does not look good,” he said, “but I’ve been crunching the numbers and if traffic patterns hold constant we may be able to make the July payment.”
The bonds were rated above investment grade when sold, but they have been considered junk by all three major rating agencies for some time. They were not insured at the time of sale, but some bonds were insured in the secondary market.
The authority’s board hasn’t had the money to pay for audited financial statements for years.
A $10,000 block of current interest bonds sold for more than 60 cents on the dollar on May 14, 2010 — a high for the year. Just last week, a customer sold $40,000 of bonds for just over 38 cents on the dollar.
The capital appreciation bonds are plummeting in value as well. A block of $160,000 sold for just over 11 cents on the dollar in an inter-dealer trade last September. A customer bought $25,000 on Wednesday for just over 15 cents on the dollar.
Last fall, one of the insurers attempted to get a bondholders’ committee organized, but it is not clear if it was successful.
Some bondholders hope that the change in state administration with the election of Gov. Rick Scott, and eventually a new secretary of the Florida Department of Transportation, could bring some relief, according to Jay Abrams, chief municipal credit analyst for FMSbonds.
“We feel that the state needs to be a participant in any solution that occurs,” said Abrams, who has talked with some investors. “After all, this project is part of the state transportation system, the state would eventually take ownership of the bridge whenever the bonds are paid off, and the state operates the bridge.”
Abrams said he did not know if anyone has approached the new governor about the situation, since Scott was just sworn in Jan. 4.
“I do think as time goes on it would be easier if the state acknowledges it has a role to play because bondholders don’t feel this was a result of any action of theirs and they are being asked to sacrifice,” he said.
Even Lamb, the authority’s sole remaining board member, said he wonders why the state has not stepped in to help.
“If this bridge goes into real default, it will affect the state’s bond rating,” he said.
While the Florida DOT operates and maintains the bridge, the state agency is not responsible for the authority’s debt. It is not a full faith and credit of the state, Marsha Johnson, director of FDOT’s office of financial development, said in an interview in August.
“We are not in a financial situation to assume the debt or anything like that,” Johnson said then.
Meanwhile, the SEC has called the former board chairman in to testify and requested numerous documents, financial reports, and various information related to disclosures that were given to the authority’s dissemination agent pursuant to the continuing disclosure agreement.
The authority’s agent is the trustee, according to bond documents.
Lamb said the documents requested by the SEC were “all boxed up” and delivered. The SEC asked for additional information and that was provided.
“Everything seemed to have been in order,” he said.