NY-NJ Port Authority rating cut a notch to Aa3
The credit rating on $18.2 billion of consolidated debt issued by the Port Authority of New York and New Jersey was cut one notch to Aa3 on Monday by Moody's Investors Service, which cited an extra $17 billion of capital needs that have been identified, Reuters reports.
Port Authority officials said last week they were re-prioritizing planned projects in light of the extra capital that consultants said will be needed on top of an existing $26.9 billion 10-year capital plan.
The credit agency gave the debt a stable outlook.
The Port Authority runs the metropolitan area's airports, along with some of the most important bridges and tunnels, the ports and the PATH commuter station. The authority also is leading the rebuilding of the World Trade Center at Ground Zero.
Saying the Port Authority's fiscal health remains strong, Lisa MacSpadden, a spokeswoman, said it "is committed to continuing its extensive reform initiatives to cut costs, find additional sources of non-toll revenue, and move forward with its core mission of building and maintaining the region's extensive transportation network."
Other risks Moody's identified included a $2 billion increase in financing needs through 2016, mainly for the World Trade Center site, and the possibility that planned toll and fare hikes over the next few years will reduce the number of motorists and passengers that use its systems.
Even higher fare and toll hikes might be required.
Referring to the additional $17 billion of capital improvements that are needed, Moody's said: "These projects could require higher toll and fare increases or other revenue-raising initiatives that may not be sustainable."
The Moody's report piggybacks on the Port Authority's release last week of consultants' reports that highlighted the inadequacy of the current capital plan and recommended reorganizing the authority's management. In February, a consultant's report slammed the agency as "dysfunctional."
The Wall Street credit agency also said the way the governors of New York and New Jersey shared control of the Port Authority left it vulnerable to "political interference that can result in delays, revenue diversions for non-system assets, and added cost for major capital projects."
Last year, New York Governor Andrew Cuomo and New Jersey Governor Chris Christie reduced planned toll and fare hikes, and ordered the authority to hire consultants to analyze its operations and capital plan - and find cost savings.
The structure of the Port Authority's debt pushes potential difficulties it could have repaying it - if the economy weakens or fuel prices rise - into the future.
Referring to the authority's $2 billion taxable bond sale last week, Moody's said:
"The increasingly back-loaded amortization of debt with this issue, while providing more debt capacity and stable financial metrics in the near and medium term, increases longer-term risks, particularly through uncertain future economic cycles and planned stepped rate increases."
Moody's list of positive factors for the Port Authority include its "near monopoly" over regional transportation links and "resilient demand" for them, Moody's said.