Fitch Ratings has affirmed its 'D' rating on Santa Rosa Bay Bridge
Authority's, FL (the authority) approximately $116.8 million in
outstanding revenue bonds, series 1996. Fitch downgraded the bonds to
'D' on July 1, 2011 as a result of a debt service payment default.
KEY RATING DRIVERS:
Ongoing Events of Default: Due to the authority's extremely constrained
financial profile, stemming from continued poor traffic and revenue
performance, cash flow from operations has been insufficient to make
debt service payments requiring the authority to repeatedly draw on the
debt service reserve fund. Gross revenues in conjunction with internal
liquidity were insufficient to make the full scheduled debt service
payments on July 1, 2011 and Jan. 1, 2012. The authority's debt service
reserve fund was fully depleted in March 2012 when the trustee made a
partial interest payment of $2.2 million towards the interest payment of
$4 million that was due on July 1, 2011. The balances due on those dates
WHAT COULD TRIGGER A RATING ACTION:
The trustee has reported that various potential alternatives are being
explored. Although the authority has recently formed a new board, Fitch
has not been made aware of any current plans to restructure the bonds.
Absent a possible restructuring, the authority's gross revenues are
expected to remain insufficient to make the scheduled debt service
payments and the default situation would remain uncured as the debt
service requirements increase.
The bonds are secured by the pledge of gross revenues of the authority.
Moneys paid by Florida Department of Transportation (FDOT) under the
lease purchase agreement are not included in the gross revenues.
The authority's revenue generating asset is the Garcon Point Bridge,
which traverses the Pensacola Bay from Garcon Point on the mainland to
the Gulf Breeze Peninsula to the south. The toll facility extends from
US 98 to the south to I-10 to the north, covering approximately 12 miles.
Overall traffic has been considerably lower than the original plan of
finance, with the authority's initial 1996 forecast projecting 3.6
million transactions in fiscal 2011 (ended June 30) versus actual
performance of 1.25 million, approximately 35% of originally forecasted
levels. As part of its plan of finance, the authority implemented a
$0.25 toll increase in January 2011 to partially mitigate revenue
shortfalls. The two-axle rate increased to $3.75 and represented the
authority's fourth scheduled toll increase since the first increase in
July 2001. Traffic declined 1.3% in fiscal 2011 due to elasticity
associated with the toll increase, but growth was also tempered due to
continued local economic weakness. Although revenues increased by 1.7%
in fiscal 2011, cash flow from operations were insufficient to cover all
debt service costs and the authority had its first debt service payment
default on July 1, 2011 when the required $5 million principal and
interest payment was not made.
Traffic grew approximately 3% during the first 10 months of fiscal 2012
(through April), while revenues were up by approximately 9% over this
time period in fiscal 2011. The improved performance can be attributed
to a full year affect of aforementioned toll rate increase and traffic
recovery post the Gulf Oil Spill. Despite the revenue increases of about
12.7% during the period between July and January, as compared to the
same time in fiscal 2011, the authority's gross revenues were
insufficient to make the interest payment of over $2 million due on Jan.
1, 2011. Additional toll increases are currently contemplated for 2014
and 2017; however, the escalating debt profile and current level of
traffic make materially improved performance beyond this point unlikely.
The existence of two free alternative routes (Pensacola Bay Bridge/US 98
to West, and State Route 87 to the East, currently being expanded from
two lanes to four) will increasingly limit any remaining ratemaking
FDOT continues to operate and maintain the bridge. Under the lease
purchase agreement with the authority, FDOT pays operating and
maintenance (O&M) expenses for the bridge and remits all tolls collected
to the authority as lease payments, which are remitted to the Bank of
New York Mellon. The term of the lease runs through the life of the
bonds and terminates in 2028, at which point FDOT will own the bridge
(assuming the bonds are fully paid). Though the current agreement states
that FDOT is to be reimbursed annually from toll revenues for payment of
O&M, these reimbursements are deeply subordinated to debt service and
roll over the to the following year should sufficient revenues be
unavailable. FDOT has paid O&M expenses since the project's inception
and is expected to do so for the foreseeable future. The authority's
total liability to FDOT as of fiscal 2011 year-end includes O&M advances
of $16.8 million accrued as long-term debt and $7.9 million from
non-interest-bearing Toll Facility Revolving Trust Fund loans made to
the authority to cover initial bridge design costs.
Additional information is available at 'www.fitchratings.com'.
The ratings above were solicited by, or on behalf of, the issuer, and
therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria & Related Research:
--'Rating Criteria for Infrastructure and Project Finance', Aug. 16,
--'Rating Criteria for Toll Roads, Bridges, and Tunnel', Aug. 10, 2011.
Applicable Criteria and Related Research:
Rating Criteria for Toll Roads, Bridges, and Tunnels
Rating Criteria for Infrastructure and Project Finance
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