BRADENTON, Fla. — A last-ditch effort to prevent the Santa Rosa Bay Bridge Authority in northwest Florida from a bond payment default has failed and the remaining member of the board plans to resign next week.
The authority doesn’t have enough money for the debt service payment due Friday.
The SRBBA already is in technical default on its bonds for failing to meet debt-service coverage and reserve-replenishment requirements. Audits have not been done for years and the Securities and Exchange Commission is investigating.
As if the authority’s demise is a fait accompli, the board meeting scheduled in four weeks will be cancelled “for lack of a quorum,” according to a notice on the agency’s website posted this week.
Without a board to steer the SRBBA through default, or to take any other legal actions such as authorizing a bankruptcy filing, it may be up to the trustee, Bank of New York Mellon, or bondholders to take charge.
Even if a full voting board existed, it would have no money, no staff and no legal counsel. Because there are no funds to provide board members with legal representation it has been impossible to find enough volunteers willing to serve on the board, state Rep. Doug Broxson, R-Gulf Breeze, said Monday.
Broxson said he tried to determine if anything could be done to prevent a default.
He read the official statement and interviewed the former board attorney, the trustee and the Florida Department of Transportation, which operates and maintains the bridge under a lease-purchase agreement.
“I tried to get a general understanding of where we were,” Broxson said. “It immediately became obvious we had one dancer in a tango.”
Bondholders may be left in limbo, he said.
“If I owned bonds for that bridge, I’d try to find out how I’m going to be paid,” Broxson said.
The representative, who often uses the toll facility known as the Garcon Point Bridge, will report his findings Tuesday to the Republican Club of Santa Rosa County, where Morgan Lamb is the president.
Lamb, the sole member of the SRBBA board, said he planned to resign if Broxson failed to come up with a solution.
“I do not want to be party to the actual mechanics of going through default, or foreclosure, or any fight between the state and the money that goes to bondholders,” Lamb said. “I think [bondholders] will expect the state to maintain the bridge, and I feel like the state is going to say 'no.’ After it goes into default, it’s a whole new ballgame.”
FDOT is expected to publicly release information soon about the status of the bridge, an agency official said Wednesday.
Lamb said the SRBBA would not make a complete bond payment Friday, though he did not know how short it would be.
For years the authority has dipped into reserves to supplement debt service payments because toll collections never met projections.
The principal and interest payment due on Friday is just over $5 million.
From January through May, just over $1.5 million in tolls were collected.
The reserve account contained $2.09 million after the Jan. 1 payment. It is required to have $9.24 million.
The trustee could not be reached for comment.
To build a 3.5-mile-long bridge, the SRBBA issued $75.5 million of Series A current interest toll revenue bonds in 1996 that mature in 2028 and $19.4 million of Series B capital appreciation bonds maturing between 2005 and 2028.
The bonds are secured primarily by toll revenue and interest income on that revenue.
About $115.9 million of bonds are outstanding because of increasing principal due to accretion on the capital appreciation bonds of about $20 million, according to Maria Matesanz, senior vice president of global project and infrastructure finance for Moody’s Investors Service.
The bonds — originally in the triple-B category — are rated below investment grade at Caa3 by Moody’s, CC by Standard & Poor’s and C by Fitch Ratings.
The agencies have maintained junk ratings on the bonds for more than a decade due to regular draws on reserves and traffic that never came close to meeting projections.
The bonds are trading at high yields.
A customer on June 22 sold $5,000 of bonds for 28 cents on the dollar to yield 23.33%.
Two customers each on June 20 bought blocks of $50,000 for 37 cents on the dollar to yield 18.64%.
In addition to the outstanding bonds, the bridge authority owes FDOT $23 million for operations and maintenance and is liable for a $7.9 million loan from the state toll facilities revolving trust fund. The department’s payments are subordinate to the bonds.
Last fall, the SEC began an investigation by calling the former board chairman to testify and requesting numerous documents, financial reports and information related to disclosures that were given to the authority’s dissemination agent pursuant to the continuing disclosure agreement.
The SEC inquiry prompted at least three board members to resign. Some thought by resigning they might escape the commission’s inquiry, but they did not.
The former board members were forced to hire their own attorneys since the authority had no funds to provide counsel for them.
Lamb said many people involved with the authority — except him — received SEC inquiry letters and have given statements. They included the board’s former attorney, Roy Andrews, who worked for free many years because the board didn’t have money to hire staff or conduct audits. Andrews resigned earlier this year though his name is still listed on the SRBBA website.
An FDOT staffer, who was made available to assist the authority’s board over the years at no cost, also received a letter from the SEC, according to Lamb.
ACA Financial Guaranty Corp., which insured around 23% of the debt in the secondary market, explored creating a bondholders committee to discuss restructuring last October.
“It appears that ACA was not able to obtain consent from 51% of the bondholders that is required to take any action,” according to a recent report by the Florida Transportation Commission that was filed with the governor and top lawmakers.
In the few meetings that were held by the authority board last year, several bondholders said they felt that the state would bail out the bridge and prevent it from defaulting. They also believed FDOT was liable for the bridge because the agency has a lease-purchase agreement to maintain and operate it through the final maturity of the bonds.
FDOT officials have said in the past that the bonds are non-recourse, payable only from tolls and related revenues, and that the agency has no money to assist with payments.
When Broxson was asked if the state would intervene to prevent a default, he said Florida is broke.
“We’re laying off state employees, cutting back on teachers’ pay and state employees’ pay, and we robbed the transportation trust fund of $300 million this year to balance the state budget,” he said. “I don’t think the state has the ability to do anything.”
Broxson said consultants originally projected the bridge’s income this year would be $12 million, but collections will be around $4 million. “The state, at best, is indifferent to having a solution,” he said.
While Broxson said he developed a good understanding of the situation, he has no ability or authority to prevent the default on Friday, he said.
“I believe when whatever reality sets in” after Friday’s default, Broxson said, “there will be some activity.”