NEW YORK, Feb 12 (Reuters) - Transportation bonds secured by grants from the U.S. government will suffer this year from uncertainty stemming from unpredictable federal funding and a still-tepid economic recovery, Standard & Poor’s rating services said on Tuesday.
The rating agency, which in September revised to “negative” its outlook on grant anticipation revenue vehicle or GARVEE bonds, also said that the transportation sector ratings are expected to remain largely stable. The sector includes airports, toll roads operators as well as bonds secured by parking systems, grants, and other facilities.
An extension approved in June 2012 of the Federal Aid highway program funding through fiscal 2014 will benefit GARVEE bonds, but “we believe the sector continues to face economic and financial risks associated with the pace of economic growth and with the consequences of the ongoing federal deficit and budget showdowns,” Moody’s said.
“Particularly the $19 billion of appropriations from the general treasury, and not from dedicated fuel taxes, contained in the bill” poses a risk, the rating agency said.
S&P added that another risk posed to the transportation sector in general comes from growing demand for capital needed to finance new infrastructure.
According to a recent report by the American Society of Civil Engineers, the United States needs $2.7 trillion of infrastructure investment by 2020, but the ASCE estimates that only $1.6 trillion will be spent, S&P reported.
“The projected gap is mainly in surface transportation ($846 billion), with airports at $39 billion, and ports and waterways at $16 billion,” the rating agency said.