One of the nation’s largest transportation borrowers issued its first bond document disclosure on the fiscal impacts from the COVID-19 pandemic.
The Port Authority of New York and New Jersey posted a statement on the Municipal Securities Rulemaking Board’s EMMA system Tuesday revealing direct fiscal challenges facing the agency since the virus’s outbreak began.
“Because approximately one third of the Port Authority’s revenues are derived from passenger tolls, fares and user fees, declining utilization has had and will continue to have a negative effect on our revenues for an indeterminate period of time,” John A. Tomasulo, assistant treasurer for the bi-state agency, said in the voluntary filing. “In addition, some tenants who pay rent to locate and operate at our facilities are also heavily affected by the reduced activity levels and may be unable to meet certain obligations to the Port Authority.”
The April 14 EMMA disclosure came five days after Moody’s Investors Service
On March 26, S&P Global Ratings revised to negative the outlook on nearly all long-term credits in the U.S. transportation infrastructure sector, including the Port Authority.
Port Authority bonds are rated Aa3 by Moody's and AA-minus by S&P and Fitch Ratings. The agency had $22.2 billion of outstanding consolidated bonds as of March 31, 2020, according to the filing.
The disclosure statement said that airlines operating at the Port Authority’s three major airports, Kennedy, LaGuardia and Newark Liberty, would be permitted to defer payments of certain cost recovery fees from March 1 to April 30 before resuming resume in June 2020 for May activity. Deferred payments will then be made in monthly installments over a six-month period beginning on July 1, 2020. The Port Authority is estimating $175 million in deferred cash flow during the second quarter as a result of this action.
The Port Authority also announced in the filing a temporary deferral of certain fees and rental costs at the airports. Rent payments between March 1 and May 31 will be calculated as a percentage of gross receipts only and without a minimum annual guarantee floor for this period. The agency is also looking at roughly $7.5 million in lower concession revenues for 2020 resulting from this change.
The Federal Aviation Administration announced Tuesday the allocation of around $450 million of grants under the federal CARES coronavirus relief act for Port Authority airports. Tomasulo said in the filing that the federal aid would not likely cover revenue losses for the Port Authority’s tunnels and bridges and that the agency is still awaiting clarity on whether its PATH system will receive grant funding related to mass transit.
“The COVID-19 emergency continues to evolve and its ultimate impact on the Port Authority is unknown at this this time, although we believe we currently have sufficient liquidity and resources to fund our operations and debt service requirements,” Tomasulo said. “The Port Authority continues to review its operating and capital budgets to reduce costs and conserve cash through December 2020 and possibly beyond.”
