DALLAS - Traffic is down on Laredo's newest toll bridge to Mexico, but the outlook for the bridge system and the Texas border city remains strong, analysts say.
The city's bridge authority won a one-notch upgrade from Moody's Investors Service on its debt and also for $3.5 million of revenue bonds expected to be issued next week. And Laredo got bumped up by both Moody's and Standard & Poor's on its general obligation bond rating.
Moody's lifted the bridge bonds to A2 from A3, which also affects $63 million of outstanding bridge revenue bonds.
On the GO debt, Moody's boosted Laredo to A1 from A2, while Standard & Poor's elevated the credit from A-plus to AA-minus. Fitch Ratings maintained an A-plus.
The GO ratings affect $47 million of tax-backed sewer revenue bonds and $31 million of certificates of obligation scheduled for next week along with the bridge bonds.
Laredo will issue the debt to expand an inspection station on the World Trade Bridge and to expand its sewer system along with other projects.
The bridge provides a critical link from northern Mexico's major manufacturing center in Monterrey to the Interstate 35 corridor that runs from Laredo to the Canadian border in Minnesota, analysts says.
"The city of Laredo is the largest port of entry between the United States and Mexico," Moody's analyst Kristin Button noted. "Therefore, the bridge system continues to have the largest volume of crossings of any system in Texas."
With four separate bridges, the system provides points of entry that specialize in different types of traffic. The World Trade Bridge, opened April 15, 2000, is designed to speed NAFTA traffic, so-called because of the North American Free Trade Agreement that lowered trade barriers between the U.S., Mexico, and Canada.
But traffic is susceptible to economic swings on both sides of the border, tighter security measures and events such as the Sept. 11, 2001, terrorist attacks that slowed the American economy.
In recent years, competition from China has also had an impact, according to Fitch analysts, who give the bonds an A-plus with stable outlook.
After a decline of 5% in the past two years, "data from the first seven months of fiscal 2008 show that commercial and passenger traffic is down approximately 5.5% and 1.5%, respectively, over the same seven-month period in 2007, capturing the softening of the U.S. economy and increased fuel prices that can affect cross-border shopping," Fitch analyst Vanessa Roy wrote in her report.
"Despite the fact that overall bridge traffic has been slightly lower than city projections, the bridge system's commercial essentiality, strategic position and frequent toll rate increases ensure that debt service coverage is maintained at high levels," Roy wrote. "In October 2007, the authority implemented a toll increase on commercial and passenger vehicles that should bolster its financial profile. In fiscal 2007 net operating revenues of $30.1 million provided senior debt service coverage of 4.59 times and total debt service coverage of 3.65 times service."
Standard & Poor's maintains the same A-plus on the upcoming bonds and the $63 million in existing bridge debt.
Laredo's population continues to grow rapidly, with 2008's estimated population of 231,470 up 31% over 2000 census levels. The population of its sister city across the Rio Grande, Nuevo Laredo, is estimated at 300,000.