Improved debt metrics drive upgrade to Philly area transit agency
A stabilized financial position despite traffic drops drove a rating boost for the Delaware River Port Authority.
Moody’s Investors Service upgraded the Camden, New Jersey-based regional transportation authority’s outstanding revenue bonds by one notch to A1 from A2 citing improving debt conditions following a $700 million 2018 borrowing that is funding a five-year 2020-2024 $810 million capital plan. The outlook for the bonds was revised to stable from positive.
The DRPA’s outstanding Port District Project bonds were concurrently elevated by Moody’s one notch to Baa1 from Baa2. The authority has total outstanding debt of about $1.23 billion.
“The rating upgrade was prompted by DRPA's solid metrics in fiscal year 2018 and expected for 2019 despite a slowdown in traffic growth experienced over the last 24 months,” Moody’s analyst Kathrin Heitmann wrote in a Feb. 4 report. “Moody's projects that management will continue to maintain a tight control over costs even in a more stable growth environment.”
The DRPA operates four spans that cross the Delaware River between New Jersey and Pennsylvania including the Ben Franklin, Walt Whitman, Commodore Barry and Betsy Ross bridges. The authority also runs the PATCO rail transit system from Camden County, New Jersey to Philadelphia.
The bi-state transportation authority saw just a 0.7% increase in total transactions for fiscal 2018. The agency also experienced a 0.6% traffic volume dip for September 2019 compared to the year-ago period.
Moody’s projects that the transportation agency will maintain tight control over costs in a more stable growth environment, which Heitmann said should support a bond ordinance debt service coverage ratio of around two times for 2018. The stable outlook reflects expectations that DRPA will maintain a total DSCR of at least 1.5x and more than 500 days cash on hand.
Heitmann noted that the DPRA’s A1 rating is also supported by servicing a busy Philadelphia metropolitan area along with having no plans for toll rate increases or debt issuance in the next two years. The agency last raised tolls in 2011 compared to other entities and crossings that increased rates in 2019, which Heitmann said provides some flexibility for future hikes if necessary. Usage of toll revenue to fund PATCO and risks of New Jersey and Pennsylvania board members fighting for competing priorities are also credit factors, Heitmann said.
The transportation agency’s Baa1 rating on its PDP bonds reflects the lack of a lien on a specific revenue stream and absence of a rate covenant, Heitmann said. The PDP bonds benefit from a fully funded debt service reserve fund similar to the A1 rated revenue bonds, Heitmann said.
The upgrades by Moody’s reinforce "the fact that the DRPA has achieved and sustained a superior level of financial performance for almost a decade,” DPRA CFO James M. White said in a statement. “This rating action also reflects a high level of operational excellence at the DRPA’s bridges, on the train line, and among administrative support staff.”