NEW YORK--(BUSINESS WIRE)--The passage of Pennsylvania's Act 89 provides a significant boost to transportation funding for the commonwealth, and increases long- term financial flexibility for the Pennsylvania Turnpike Commission (PTC), meeting significant demands and providing new revenues for roads and bridges, transit and multimodal transportation, according to a new Fitch Ratings report.
'This legislation represents a notable commitment to address a challenge faced by many states. Successful passage of the bill with bipartisan support reflects a significant turnaround from legislative setbacks earlier this year. The success of Act 89 could bode well for another key funding challenge, dealing with a growing and underfunded pension liability,' said Eric Kim, Director in Fitch's States group.
For PTC, Act 89 provides increased financial flexibility over the long term, though challenges remain in the near term. 'Since 2008, PTC has made over $3.9 billion in payments to the Pennsylvania Department of Transportation for transportation funding, under Act 44,' said Emma Griffith, Director in Fitch's Global Infrastructure Group. 'Under Act 89, the $450 million annual funding obligations under Act 44 will sunset in fiscal 2022, as opposed to fiscal 2057 prior to the legislation. As these obligations were to be funded with PTC debt, this change will result in a significantly lower future leveraging of the subordinate lien for PTC over the next few decades.' Fitch notes that PTC will contribute $50 million in cash towards transit under Act 44 from 2023 onwards.
Fitch Ratings expects to receive an updated financial plan from PTC reflecting the changes. The loss of Motor License Fund enhancement on the second subordinate lien while annual Act 44 obligations stay at the $450 million level through 2022 means that near-term pressure to increase tolls remains. However, over the longer term, PTC will benefit from increased financial flexibility, potentially reducing needs for ongoing toll increases or providing the ability to accelerate mainline long-term capital needs.
The full report is available at www.fitchratings.com.
Additional information is available on www.fitchratings.com.
Applicable Criteria and Related Research:
--'Rating Criteria for
Infrastructure and Project Finance' (July 2012);
--'Rating Criteria
for Toll Roads, Bridges, and Tunnels' (October 2013);
--'U.S. State
Government Tax-Supported Rating Criteria' (August 2012).
Applicable Criteria and Related Research: Pennsylvania Turnpike
Commission
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