KBRA Downgrades Peninsula Corridor Joint Powers Board Farebox Revenue Bonds to A+, from AA-; Revises Outlook to Stable
23 Jan 2025 | New York
KBRA downgrades the long-term rating for the Peninsula Corridor Joint Powers Board Farebox Revenue Bonds to A+, from AA-. The Outlook is revised to Stable.
The rating downgrade reflects large projected budget gaps arising because of Caltrain’s slow post-pandemic ridership recovery and significantly increased operating expenses following the substantial completion of the Peninsula Corridor Electrification Project (PCEP) in September 2024. Reserves and non-recurring state operating assistance will cover most operating needs through FY 2026, but anticipated gaps grow to around a quarter of resources available for operations in FY 2027 and will grow thereafter in the absence of a new funding source.
Key Credit Considerations
The rating action reflects the following key credit considerations:
Credit Positives
- Gross lien revenue pledge providing strong coverage of Farebox Revenue Bonds despite pandemic induced ridership declines.
- Favorable long-term demographic trends and high income level of population base serve to support long-term ridership growth.
For Downgrade
- Outyear budget gaps are large, reflecting weak ridership recovery and large anticipated operating cost escalations following the September 2024 substantial completion of PCEP.
Rating Sensitivities
For Upgrade
- Dedication of a new recurring funding source that will restore structural balance to operations.
For Downgrade
- Inability to materially address outyear budget gaps.
- Unfavorable developments in ability to manage near-term liquidity.
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