Bond rating company affirms bridge system's status

The number of crossings at Cameron County’s three international bridges has dropped for the fifth year in a row, prompting bridge system officials to increase tolls the last two years to compensate for the decline in revenue.

Fitch Ratings is impressed. The bond credit rating agency maintained the county’s international toll bridge system’s “A” rating in its latest review of the system’s finances — partly on the strength of the system’s “flexibility” when it comes to setting rates.

“That gives them a comfort level that the county is committed to increasing toll rates if we need to,” said Pete Sepulveda Jr., county administrator and bridge system chief.

Violence in Mexico is the main reason fewer people are crossing the border at Brownsville, though a weak economy likely has been a factor as well. Traffic declined 8.3 percent in fiscal year 2011, which ended Sept. 30, to 5.1 million total crossings. Passenger vehicle traffic has been affected the most, dropping 12 percent during the 2011 fiscal year. Passenger vehicle crossings represented roughly 58 percent of total bridge traffic for the year.

Commercial traffic has been more resilient, according to Fitch, actually increasing 3 percent during the same period. Commercial traffic generates only 24 percent of total bridge revenues, however, compared to 61 percent from passenger vehicles. Pedestrians accounted for 36 percent of total crossings for the fiscal year.

In response to the drop in revenue, bridge system officials in September 2010 increased passenger vehicle tolls by 50 cents and pedestrian tolls by 10 cents. This increase boosted fiscal year 2011 revenues by 4.3 percent, to $14.6 million.

Another toll increase followed in September 2011 for bicycles and pedestrians. The first two months of fiscal year 2012, October and November, showed crossings down 4.8 percent but toll revenues up 2.5 percent over the same period last year.

The system issued $7.2 million in revenue bonds to expand Veterans International Bridge at Los Tomates to accommodate more commercial traffic. That project is still under construction. Also, the bridge system owes approximately $14.8 million as its share of certificates of obligation issued by the county in 2005, 2008 and 2011.

Sepulveda noted that Fitch — in handing down its rating — was satisfied the system is producing enough revenue to adequately pay off its debt.

“In today’s environment it’s highly unlikely that anybody’s getting an upgrade,” Sepulveda said. “Just to keep the same rating is a victory. The outlook is stable, so that’s promising.”

Along with the “A” bond rating, Fitch gave the system a “stable” rating outlook, meaning the rating agency sees no reason to anticipate a ratings downgrade in the future. Fitch cited other factors, including the bridge system’s success at keeping expenses down; its level of cash on hand as a buffer against a major disruption in traffic; and “manageable capital expenditure needs” — essentially that the bridges themselves are in good shape physically and won’t require major capital expenditures anytime soon.

Cameron County’s three bridges that belong to the system are Veterans International, the Gateway Bridge and the Free Trade Bridge.

Factors that could trigger a “rating action,” according to Fitch, include a major decline in crossings and toll revenue caused by a decline in border-region manufacturing and cross-border trade activity; and/or security concerns that further discourage border crossings.

Leveraging debt too highly, reluctance to raise tolls when necessary or the failure to control operating and maintenance costs are among the other factors that could trigger a ratings downgrade, Fitch said.

But so far, so good.

Sepulveda said he hopes the modest boost in commercial traffic the last couple of years will continue.

“You really can’t plan on that, because you don’t what’s going to happen from one day to the next,” he said.

That said, the Veterans Bridge expansion, which will untangle commercial traffic from passenger traffic and allow trucks to get through faster, should help — especially when combined with the East Loop project, which will provide a direct link between the Veterans Bridge and the Port of Brownsville.

“That should increase our commercial traffic,” Sepulveda said. “In the next couple of years we should be well established infrastructure-wise to be able to accommodate more commercial vehicles. Right now we’ve exhausted our capacity at the bridge to carry any more commercial traffic — at least northbound.”

The U.S. portion of the expansion should be complete around the end of May. Once it’s finished, the new lanes will be put into service right away. The Mexico side of the expansion, ideally, will be finished by the first quarter of 2013, Sepulveda said.

As for the situation in Mexico and the effect of violence on border crossings and bridge revenue, he’d love a return to normal.

“Obviously most of that is out of our hands,” Sepulveda said. “There’s not much we can do about it.”