DALLAS — Amid a continuing plunge in revenues, transportation planners in the Phoenix area are cutting nearly $7 billion from a $16 billion freeway program financed through revenue bonds.
At a meeting of the Regional Council of the Maricopa Association of Governments Wednesday, planners said they expected a $6.6 billion shortfall in revenues over the next 15 years. That led to a decision to cut the existing freeway improvement program from $16 billion to $9.4 billion, a 41% reduction.
The program is funded by sales tax revenue in Maricopa County under Proposition 400 approved by voters in 2004. Those revenues go into the regional area road fund, which backs bonds issued through the Arizona Transportation Board. In May, the board issued $440 million of revenue bonds for the freeway project.
The bonds are secured by a first lien on a sales tax set at about 6.67% of the Arizona state sales tax rate. The state collects the tax on behalf of the county, with pledged revenue held in trust by the state treasurer. Voters authorized the tax for a 20-year period expiring Dec. 31, 2025.
At last month’s meeting of the regional council, MAG transportation director Eric Anderson reported that the regional area road fund, or RARF, revenues had fallen in August by 13.6% compared to August 2008, and were down for 23 of the last 24 months.
For the year to date, revenues also were down 13.6% and 4% below a revised forecast for the current fiscal year.
Collections for another fund, made up of fuel tax revenues, the highway user revenue fund, were down 10.6%. Anderson said that although the Arizona Department of Transportation predicted flat growth in the highway user revenue fund, or HURF, actual year-to-date revenue was down 7.2%.
Despite the declining revenues, the RARF bonds retain their AA-plus rating from Standard & Poor’s and Aa2 from Moody’s Investors Service, both with a stable outlook.
In its May report, Standard & Poor’s noted the declining revenues but analysts wrote that debt service coverage ratios remain strong.
ADOT anticipates issuing another $1.5 billion of RARF bonds for its five-year capital improvement program, but no issuance is expected next year.
“ADOT expects that its next sale of additional parity debt would be for about $510 million in 2011,” Standard & Poor’s noted. “However, we believe the strong additional bonds test for the senior bonds provides good protection against future debt dilution.”
The cutbacks in the Maricopa County projects come on the heels of estimates from ADOT that another 15% cutback in state funding would have dire consequences for the agency, including layoffs of up to 60% of ADOT employees. The estimate came in response to a request from Gov. Jan Brewer on how state agencies would be affected by current plans in the Legislature to bridge a $2 billion state budget shortfall.
While Brewer wants to ease the pain with a three-year increase in sales tax, legislative leaders have been adamant that no taxes be raised during the recession. Although Arizona has been operating under a budget approved July 30, the spending plan became unbalanced when Brewer line-item vetoed cuts to education and human services programs.