Fitch Ratings on Monday placed the Santa Rosa Bay Bridge Authority’s BB-minus rating on negative watch, affecting about $116 million of outstanding revenue bonds. The action reflects recent year-over-year traffic declines that have grown larger since the implementation of a 17% toll increase in July 2007, resulting in a 10% decline in traffic and limited revenue growth, said a report by analyst Manutosh Mathur.
“To the extent traffic continues on its current pattern and management does not act to enhance revenue, the current profile is inconsistent with the BB-minus rating,” Mathur wrote. “Recent traffic declines may cause the reserve to be drawn down at a greater rate than was previously expected. Management’s willingness to raise tolls in the past is seen as a positive, but with decline in traffic and rapidly depleting debt service reserve funds, a plan to increase the toll beyond rate of inflation is needed.”
The current rating reflects the poor traffic and revenue performance relative to forecast and the weak financial profile of the Garcon Point toll bridge, which crosses Pensacola Bay in the Florida Panhandle.
The rating also reflects limited rate-making flexibility, approximately $6.8 million in the debt service reserve fund, the escalating debt service schedule, and the fact that the state, through deeply subordinated advances by the U.S. Department of Transportation, provides considerable operating and financial support.
Overall toll traffic has been considerably lower than initially forecasted since the bridge opened in May 1999, but growth has been evident in recent years. The authority’s forecast in 1996 called for 3.1 million transactions in fiscal 2007 versus an actual number of 1.6 million. However, traffic volume in fiscal years 2004 through 2006 demonstrated marked improvement over prior years. Fiscal 2006 and 2007 marked the first few years that the authority did not need to use its debt service reserve fund to pay current debt service, according to Mathur.
Moody’s Investors Service in September downgraded its rating to B2 from B1. Standard & Poor’s assigns a B-minus rating to the bonds.
Bonds financing the 3.5-mile long toll bridge were originally sold with Baa2, BBB, and BBB-minus ratings from Moody’s, Fitch, and Standard & Poor’s, respectively