Fitch Ratings has assigned a BBB+ rating to the South Jersey Transportation Authority’s approximately $101 million in senior revenue refunding bonds series 2019 A&B and a BBB- rating to its approximately $9 million in subordinated bonds series 2019A.
Fitch says the rating outlook on both ratings is stable.
The ratings reflect a small expressway with significant exposure to leisure-based traffic, while recognizing the authority’s demonstrated cost management to keep expenses low and its ability to raise tolls. Fitch’s rating case coverage metrics reflect implementation of a 40 percent toll increase needed for coverage to remain in-line with the assigned rating levels through the forecast period. The all-liens coverage does not include any rehabilitation and repair fund deposits. The two-notch ratings distinction between the senior and subordinate bonds reflects the deeply subordinated nature of the subordinate bonds and their weaker security package.
Fitch says the authority’s anchor asset, the Atlantic City Expressway, is exposed to leisure-oriented traffic, which is dependent on the health of the Atlantic City gaming industry and visitors to the southern New Jersey seashore resort towns. Traffic on the expressway began a period of decline in 2008, primarily reflecting the economic downturn and increased gaming competition in the region, but has stabilized since 2015.
Fitch says the average toll of $1.53 for year-to date 2019 for the expressway is moderate, affording the authority flexibility to raise tolls, especially given the last toll increase of 50 percent in 2008.