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Fitch said it “does not believe that the traditional tools available to balance transit agency budgets will be sufficient to offset a meaningful proportion of revenue losses. While some capital spending may be delayed, service is unlikely to be curtailed enough to offset revenue losses due to the essentiality of the public service provided and need to continue providing transportation to health care workers and other essential workers. Fare increases are unlikely to be a meaningful budget balancing tool in the current environment and would be insufficient to offset the magnitude of revenue losses expected if attempted.
“These fare-dependent transit agencies entered the current period with solid to strong liquidity and operating reserves to offset typical ridership and economic volatility. However, the current period of stress is significantly greater than the rating case stresses factored into Fitch’s transit ratings and a more extreme stress than transit agencies routinely plan for. Fitch believes transit agency liquidity positions are likely to erode rapidly given the current the scope of revenue losses and the need to continue essential public services.
“Major transit agencies have requested emergency federal assistance to support continued provision of transit services in U.S. urban areas. Fitch expects some degree of state and federal support to be forthcoming due to the essentiality of transit services to public health and safety. The degree of support and the speed with which it is provided will largely determine the near-term ratings impacts of the current ridership losses on these credits.
“The move to Rating Watch Negative reflects actual and expected severe declines in transit ridership and revenues due to coronavirus pandemic. The rating action applies to the transit agencies that have the highest dependence on fares to fund operations, though further rating action may be necessary in the sector as the degree of second order impacts (declines in economically sensitive tax revenues) becomes clear.”
The following ratings are affected:
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