CHICAGO – Fitch Ratings has affirmed the ‘A’ rating on $71.4 million in outstanding Rhode Island Turnpike & Bridge Authority revenue bonds, the global rating company announced Tuesday.
One of the key drivers to the positive ‘outlook stable’ rating was an established traffic base on the Claiborne Pell Bridge. Though Fitch commented on the bridge’s limited growth prospects, volatility is low, represented by a compound annual growth rate of 1.5 percent from 1997 to 2011.
The toll rate increase on the bridge, which changed for the first time in 40 years in 2009, was also mentioned. The next toll rate increase has been approved and is scheduled to take effect July 2012.
“With relatively low toll rates, the authority retains considerable economic ratemaking flexibility, and recent actions underscore an increased willingness to adjust rates to meet obligations,” said the report.
Declining but sufficient coverage and moderate leverage were also listed as reasons for the favorable rating.
“Toll increases are needed over time to meet essential capital rehabilitation needs that have been long deferred on the Pell Bridge and the toll-free Mt. Hope Bridge, combined with significant life cycle maintenance and rehabilitation costs anticipated in the near future. Limited surplus revenue after capital commitments constrains financial flexibility for unanticipated developments,” said the report.
Traffic and revenue performance for July 2011 through January 2012 is mixed with traffic growth of 2.3 percent but a revenue decline of 2.4 percent.
According to the Fitch report, more travelers are using E-ZPass, which has a significantly discounted toll rate relative to cash. “Therefore, while traffic is growing, toll revenues are slightly down,” said the report.
After the toll increase in September 2009, revenue increase 37.3 percent in 2010. The board approved another toll increase for the Pell Bridge effective July 2012.
“While tolls have only increased once in the authority's history, management has indicated that it is committed to reviewing the toll schedule and implementing necessary increases sufficient to satisfy its debt service obligations as well as generate excess cashflow to fund part of its capital program,” said the report.
There are legislative proposals to reinstate tolls on the Mt. Hope Bridge, implement tolls on two other currently toll-free bridges in the area and add them to the system, but Fitch said that it was unable to assess the impact of these proposals.