Port Feeling the Strain

Fitch Ratings this week downgraded to BBB-minus from BBB the implied revenue bond rating on the Cleveland-Cuyahoga County Port Authority, and revised its outlook to negative from stable.

The downgrade reflects the “financial strain the authority faces beginning in 2009 due to lower forecast revenues and higher expenses,” Fitch said in a release on the downgrade.

The Port Authority is expected to face higher operating costs beginning this year due to new hires, proposed construction of a disposal facility, and the eventual relocation of the port, according to Fitch. The port’s 2009 budget anticipates a reduction in net revenue.

Most of the authority’s income comes from its long-term leases. Analysts said as the port’s expenses rise, it will likely be increasingly dependent on its property tax levy to cover operating shortfalls and debt service.

“This authority’s tax revenue is flat so financial imbalance is likely to grow over time,” Fitch said. Nearly a fourth of the port’s operating revenue stems from financing fees from the bond fund and conduit financings, and that revenue has declined sharply over the last year.

The negative outlook is a result of a weak regional economy, the port’s reliance on steel shipments, and the likely use of the authority’s balance sheet for a delinquent borrower in its bond fund. On the bright side, analysts said, the port agency has more than $8 million in unrestricted cash and investments.

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Transportation industry
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