Moody’s Ratings issues negative outlook for SEPTA’s financial health
Moody’s did not change any of its ratings for SEPTA’s debt, but an analyst for the ratings agency said “SEPTA is currently under significant operating stress.”
With SEPTA financially battered by a state budget stalemate and a court order preventing the transit agency from implementing service cuts, Moody’s Ratings on Wednesday revised its outlook for the agency from stable to negative.
Moody’s did not change any of its currently positive ratings for SEPTA’s debt, but an analyst for Moody’s said “SEPTA is currently under significant operating stress” because of uncertainty about whether state lawmakers would come up with needed transit funding and a court ruling on Friday that prevented the agency from increasing fares and cutting Regional Rail service to make up for its budget shortfall.
“SEPTA’s reduced service levels could lead to credit negative weakening in political and public support for the system. Despite institutional and legal supports for bond payments, deteriorated finances would be negative for bondholders,” wrote Baye Larsen, a lead analyst at Moody’s.
In a statement Wednesday night, SEPTA General Manager Scott A. Sauer said the revised outlook by Moody’s “is deeply troubling, but not surprising.”
Sauer said the “continued lack of a sustainable funding solution from the state, combined with even further uncertainty stemming from the Aug. 29 court order, has put our fiscal health on the line. Our customers are dealing with constant upheaval, and without a resolution soon, it is likely that we will have to take more severe steps in the near future causing economic, educational and environmental harm across the city and region.”
On Thursday, SEPTA returned to court for a hearing before Common Pleas Court Judge Sierra Thomas Street, who issued the temporary order on Friday halting the agency’s cuts and fare increases.
This time, the judge ordered SEPTA to “immediately reverse all service cuts,” including route cuts, service reductions, and staffing reductions. The new order does not apply to the proposed fare increases.
On Wednesday, SEPTA spokesperson Andrew Busch declined to say definitively that SEPTA would appeal an unfavorable ruling, but it is highly unlikely the agency would not appeal.
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Last month, SEPTA eliminated and shortened several dozen bus routes, among other cuts, in response to a projected $213 million annual deficit and a lack of state funding. Fare increases were set to take effect, along with a slashing of midday trains on Regional Rail.
The state legislature has yet to adopt a budget for the fiscal year that began July 1.
If additional state funding is not approved, more SEPTA cuts are planned for January, including the elimination of five Regional Rail lines.
The judge’s rulings were in response to a lawsuit filed by attorney George Bochetto on behalf of a consumer advocate and two riders who argued the transit agency’s actions were unlawful.
“If this injunction becomes permanent, and the commonwealth does not provide additional funding, then SEPTA would have to rely on reserves to balance its budget, resulting in a stark decline in liquidity,” the Moody’s analyst wrote.