News Column

Fitch Affirms Golden Gate Bridge, California at 'A+'; Outlook Stable

February 16, 2014

Fitch Ratings has affirmed the implied 'A+' long-term rating on the $61 million outstanding commercial paper (CP) notes of the Golden Gate Bridge Highway and Transportation District, CA (the district).

The district has no outstanding long-term debt, with no additional borrowings expected. The Rating Outlook is Stable.


Mature Bridge Traffic Subsidizes Transit: Golden Gate Bridge is a unique, historic bridge with a stable traffic base, but has experienced modest traffic declines through recent economic cycles. Significant cross subsidy is required by the transit operation from the bridge operation. Operating grants from federal, state, and local governments are required to cover costs as operating revenues do not cover bridge and transit expenses. Single facility risk is embedded in the nature of the asset. Revenue Risk: Volume - Midrange.

Demonstrated Rate Making Flexibility: The Golden Gate Bridge's critical role in serving the region's transportation needs, its mature traffic base and its current modest rates provide significant rate-making flexibility. Management has been proactive in increasing ferry and bus fares to address projected deficits. The district switched to all electronic tolling in March 2013. Revenue Risk: Price - Stronger.

Considerable On-going Capital Investment Required: The district requires continual capital expenditures to maintain the system. It is currently working to a 10-year capital plan of $1.4 billion with the majority allocated to bridge-related expenditures. Approximately 80 percent of capital expenditures are expected to be funded from government grants, which is consistent with past practice. Infrastructure/Renewal: Midrange

Modest Non-Amortizing CP Debt Profile: The district pays interest only on its CP notes, which are rolled over within a program stretching to 2030. While the district is exposed to variable interest rates when rolling CP, Fitch is comfortable that the impact of this should be small given the relative size of its $61 million aggregate CP exposure. Debt structure - Midrange.

Low Leverage Produces Strong Metrics. The district's debt exposure is small relative to available resources - its current net debt to cash flow available for debt service (CFADS) ratio is - 10.9x, reflecting high degree of liquidity, equating to approximately 457 day's cash on hand in fiscal 2013. The district's interest cover ratio (ICR) of 127.4x for fiscal 2013 reflects operating grants included as a revenue source, the very low interest rate payable on current CP of 0.18 percent, as well as the district's very low gross leverage.

Fitch currently maintains an 'F1+' short-term rating on the CP notes, which reflects the district's own financial resources and market access as well as a liquidity facility provided by JPMorgan Chase Bank, N.A. (rated 'A+/F1' by Fitch) in the form of a line of credit. The line of credit expires on June 30. As of fiscal 2013 (ended June 30), the district held $195 million in unrestricted cash and investments.


--Significant reduction in operating and capital grants

--Significant reduction of cash balances (Excluding the Doyle Drive payment in 2014).

--Failure to adjust tolls and control expenses in a manner sufficient to maintain healthy financial ratios consistent with past performance;

--Significant loss of traffic as result of economic factors or a one-time event such as an earthquake or terrorist attack.


The notes are secured by operating revenue and local operating assistance net of operation and maintenance expenses and by the line of credit from JP Morgan Chase Bank NA.


The District implemented an all-electronic tolling system in March 2013 with no significant issues experienced in the first year. Bridge tolls make up the majority of the district's revenue base, and serve to subsidize loss-making transit operations- in the absence of surplus bridge revenues and government grants, transit fare revenues would be insufficient to cover operations. The magnitude of the internal cross-subsidy is demonstrated by the district's 2013 financial results, which show bridge tolls produced 69 percent of operating revenue in that year. The transit system, meanwhile, produced 28 percent of operating revenue and nearly 70 percent of the District's overall expenses. Operating grant assistance over the past six years has averaged $18.3 million, indicating the District's reliance on external assistance.

The district continues to maintain powerful rate-making flexibility. Previous bridge toll increases in 1989, 1991 and 2002 increased bridge revenue 25 percent, 36 percent and 33 percent, respectively, with only small corresponding changes in traffic of +1 percent, -3 percent and -4.5 percent. A toll increase in fiscal 2009 increased revenue 14 percent and traffic fell 3 percent. Fitch considers the district's economic rate-making flexibility in conjunction with its formidable reserves- it held $195 million in unrestricted cash and investments as of June 30, 2013, whilst being exposed to only $61 million of outstanding CP.

Bridge traffic was down 0.2 percent in fiscal 2013 while revenue was down 0.5 percent. Fiscal 2013 ferry revenue was up 6 percent while ridership was up 6 percent. Bus revenue was up 3.5 percent while ridership was up 1.5 percent.

The Golden Gate Bridge Highway & Transportation District operates the Golden Gate Bridge, which provides a vehicular crossing from the city of San Francisco across the San Francisco Bay to Marin County and points north. Since 1969, when the California State Legislature expanded the district's transportation responsibilities, the district has also operated the Golden Gate Transit bus and ferry services. The bridge, the sole direct vehicle roadway connecting the North Bay counties to San Francisco, is an internationally known landmark with significant national and state interest in maintaining its aesthetic and structural integrity.

More information: report_frame.cfm?rpt_id=682867 report_frame.cfm?rpt_id=684146

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