The Bay Area Toll Authority issued $285 million in bonds, backed by revenue from the region’s toll bridges.
Proceeds from the bonds, which have variable interest rates, will be used to refund three prior series of floating rate notes. The bond with the longest tenure will mature in 2056. The variable interest will be determined at a daily rate and payable on the first business day of each month. The bonds received a rating of AA from Fitch Ratings and S&P Global Ratings and a rating of Aa3 from Moody’s Investors Service.
The rating “reflects BATA’s monopolistic bridge network located within the large and affluent San Francisco Bay Area, a strong pricing framework with high pricing power and low demonstrated elasticity of demand, and well-maintained infrastructure,” according to Fitch Ratings.
The issuance comes as the Bay Area continues to implement a $4.5 billion capital improvement plan that funds several transportation projects in the region. The plan, which was passed by voters in 2018, has been partly financed by toll rate hikes.
The Authority administers the toll revenues from the seven state-owned toll bridges in the San Francisco Bay Area, including the heavily trafficked San Francisco-Oakland Bay Bridge. Fitch estimates that tolls could rise substantially from current levels, increasing revenue for the Authority.
However, traffic remains 20% below 2019 levels, as many of San Francisco’s wealthy white-collar workers continue to work from home. In Silicon Valley, paid traffic is still 30% below 2019 levels; some bridges in the northeast, where more blue-collar workers live, are just 10% below 2019 levels.
J.P. Morgan Securities LLC and Citigroup Global Markets served as lead underwriters for the bond issuance. The bonds were purchased roughly at par.