The Port Authority of New York and New Jersey passed a $7.17 billion operating and capital budget Tuesday for calendar year 2011 that keeps operating growth flat while boosting capital spending.
Budgeted capital spending under the plan will increase to $3.89 billion, a $760 million increase over 2010. Debt issuance, including bonds, notes, and other forms of borrowing, will rise by a similar amount next year, to $2.63 billion from $1.86 billion.
The increase in capital spending is "a function of capital needs that we have over the next 12-month period," said Port Authority chairman Anthony Coscia. "Our borrowing levels are a function of projects that are queued up and ready to be invested in, but they're all well within the bond covenants and other requirements that we have that allow us to issue debt in what we think is a responsible and creditworthy manner."
The authority operates four airports in the New York City metropolitan region, commuter rail, bridges, tunnels, maritime ports, and a bus terminal in Manhattan. It also owns the World Trade Center site.
Much of the growth in the 2011 capital budget is attributable to a $384.7 million increase in spending on redevelopment at the World Trade Center site. The capital budget calls for $1.94 billion of spending on projects at the site that include general infrastructure, a transportation hub, retail development, a memorial, and the 1 World Trade Center office tower now under construction.
Capital spending on aviation projects will decrease to $432.3 million, an $87.8 million reduction from 2010, while spending on bridges, tunnels, ports, and commuter rail will increase.
Debt service costs will rise to $701 million in 2011 from an estimated $623 million.
The authority's total outstanding debt is projected to rise to $15.71 billion in 2011 from an estimated $14.04 billion in the current year.
Moody's Investors Service analyst Maria Matesanz said that the authority's budget approach is conservative but that the rating agency will monitor its increased borrowing and debt service.
"It's something we're always focused on — the amount of debt to net revenues that an enterprise has to support its debt service," she said. "It's something we're going to be watching carefully."
On the operating side, the budget holds expenses essentially flat at $2.53 billion, a $28.3 million increase over 2010. The authority plans to reduce its head count by 200 positions to 6,777, its lowest level in 40 years. No toll or fare hikes are planned in 2011.
The authority projects revenue from its airports will increase to $2.19 billion from $2.1 billion. Revenue from bridges, tunnels, and terminals is projected to rise to $1.03 billion, a $16 million increase.
"They're holding expenses flat, which is conservative and only slightly growing their revenues due to some activity increases," Matesanz said.
She described the fact that the authority is keeping operating growth essentially flat for the third year in a row as "pretty unprecedented in their history."
One major change from last year's budget is the end of spending on the canceled Access to the Region's Core project, which would have expanded rail capacity under the Hudson River. New Jersey Gov. Chris Christie killed the nation's largest mass transit project in October. The 2010 budget included $504 million of capital spending for ARC.
The Port Authority has sold $13.32 billion of new-money bonds since 2001, including $2.16 billion in 2010, according to Thomson Reuters. The 2010 figure includes a $762.3 million conduit issuance for an air terminal at John F. Kennedy International Airport.