'Full steam ahead' as Port Authority proposes higher capital spending

BY SourceMedia | MUNICIPAL | 11/20/23 08:57 AM EST By Thomas Nocera

The Port Authority of New York and New Jersey released a proposed budget for 2024 upping capital spending to pre-pandemic levels for the first time.

At $9.3 billion total, the plan is one billion dollars larger than 2023's and provides for $3.9 billion in operating expenses, $3.6 million in capital spending, and $1.8 billion for debt service and deferred expenses.

"The overarching message from this budget proposal is clear: We are full steam ahead," Port Authority Chairman Kevin O'Toole said in a statement Wednesday.

"We're moving forward on several major projects that are critical to the region, including redevelopment and modernization work at all three of our major airports, the PATH system, the Midtown Bus Terminal, and the busiest and largest container port on the East Coast," he continued. PATH, for Port Authority Trans-Hudson, is a rail rapid transit system linking Manhattan and New Jersey.

The Port Authority said activity on all its offerings minus PATH exceeded 2019's levels through September, with regional airports seeing record-breaking numbers across the first nine months of the year.

Gross revenue through September totaled $3.1 billion, exceeding levels for the same period in 2019, the authority said in its most recent quarterly financial statement.

The new spending plan allocates $1.8 billion for debt service, reflecting an increase of $52 million, or 3%, versus 2023. That was driven by higher scheduled debt service payments on existing debt and debt service on planned new bond issuances.

The authority is projected to have a total of $27.6 billion of total obligations outstanding as of December 31, 2023, including approximately $24.7 billion of consolidated bonds and notes.

The $3.6 billion allocated for capital work surpasses pre-paramedic levels for the first time; in 2021 and 2022, capital spending of $2 billion and $1.9 billion respectively fell below planned levels as lockdown measures resulted in an estimated $3 billion in loss for the Authority.

The funds will support work on all three of the authority's regional major airports, supporting the redevelopment of John F. Kennedy International Airport, an AirTrain system for Newark International Airport, a station access project a La Guardia, and improvements to MTA New York City Transit's Q70 LaGuardia Link bus service.

Funds will also go towards beginning major work on the Port Street Corridor Improvement project at Port Newark and a $2 billion program to rehabilitate the George Washington Bridge, as well as work on a new Midtown Bus Terminal.

"This spending plan is both ambitious in its scope and responsible in its proposed spending," said Port Authority Executive Director Rick Cotton. "We're coming out of the pandemic more determined than ever to move people and goods safely, efficiently, and prudently while doing so at the highest standards possible."

The Authority went to market in September, issuing $1.1 billion in a negotiated sale managed by BofA Securities with Frasca and Associates as municipal advisor.

Orrick Herrington & Sutcliffe is disclosure and bond counsel; the bonds are exempt from federal income tax and state income tax in New York and New Jersey.

Fitch Ratings rated the sale AA-minus, Moody's Investors Service Aa3, and S&P Global Ratings AA-minus, all with stable outlooks.

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Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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