Moody’s puts negative outlook rating on River & Bay debt after NJ governor vetoes toll hike

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The debt-rating firm, Moody’s, has placed a negative credit outlook for the Delaware River and BayAuthority after New Jersey Gov. Phil Murphy vetoed a toll increase.

Moody’s noted that the scheduled toll increase for all vehicle classifications was the first ever to be vetoed by a Delaware or New Jersey governor. Delaware Gov. John Carney signed off on the toll hike.

The outlook does not mean the DRBA’s debt rating will be downgraded but serves as a cautionary note to investors. DRBA debt is now as rated A1/stable outlook

The toll hike would have translated into $34 million in additional annual revenue.. The DRBA planned to use the additional revenue to support “two separate debt issuances for critical infrastructure improvements — estimated at $270 million in aggregate,” Moody’s stated.

The decision by Murphy led to the authority postponing capital projects until it can determine adequate funding sources.

Murphy claimed the toll increase went beyond critical safety uses.

“The lack of government support for toll rate changes will continue to be an area of concern for future proposals as the failure to enact toll revisions will have a material impact on how the authority’s senior management and board choose to manage long-term operating strategies and capital improvement initiatives,” Moody’s reported.

Moody’s expects “longer-term constraints on unrestricted cash and investments, which was approximately $140 million or 600 days cash on hand as of fiscal 2018. The authority will have to collaborate on an alternative toll revision proposal with both governors and their governing boards or independently implement a new solution to address near and long-term capital needs. The loss of projected revenues will limit operating flexibility.”

Also at risk are annual subsidies to the Cape May-Lewes Ferry from the Delaware Memorial Bridge averaging $10 million every year. Ferries are typically money-losing propositions. The ferry is an alternative to a bridge-tunnel at the crossing that is not believed to be financially feasible.

On the plus side, the authority still produced strong debt service coverage ratios and few incentives for drivers seeking other options, the rating service reported.

Motives for Murphy’s decision remain unclear. It has been widely speculated that infighting with fellow Democrat and New Jersey State Senate leader Stephen Sweeney played a role in his decision. Sweeney has ties to the DRBA and other governing bodies in New Jersey.

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