Credit rating giant Fitch Ratings raised concerns Friday about the Regional Transportation District’s ability to meet future debt obligations given uncertainty in ridership and revenue caused by the coronavirus.
The announcement follows on the heels of RTD’s estimate that ridership has dropped 60% amid the outbreak of COVID-19, the contagious illness caused by the coronavirus.
The move to “Rating Watch Negative” reflects current and anticipated declines in transit ridership and revenues due to the disease, Fitch said in a statement, and applies to transit agencies that have the highest dependence on fares to fund operations.
Sales taxes represent RTD’s largest income source, accounting for 71% of revenues.
In addition to Fitch placing RTD as a whole on its credit risk watchlist, it also specifically cited the transit agency’s sales tax revenue bond, which currently holds an investment grade rating of AA.
"This is not a downgrade, but recognizes the drops in ridership and significant reductions in sales tax revenues that transit agencies are experiencing," RTD spokeswoman Pauletta Tonilas told Colorado Politics in an email. "So, the way we understand it, this is for transit agencies in general."
RTD sources repayment for the debt it issues primarily from sales taxes on bus and train fares. As ridership declines across the metro area due to people working from home and mounting concerns about being in public areas, Fitch predicts these sources of revenue are likely to plummet.
“Fitch expects widespread and sharp declines in transit ridership and fare revenues to create significant near-term stress in the U.S. public transit sector,” the agency said, calling RTD one of the transit systems at greatest risk.
“While some capital spending may be delayed, service is unlikely to be curtailed enough to offset revenue losses due to the essentiality of the public service provided and need to continue providing transportation to health care workers and other essential workers,” the statement read.
RTD’s interim CEO and general manager, Paul Ballard, recently said the transit agency has no plans to cut its service due to the coronavirus unless enough bus drivers and light rail operators call in sick.
Tonilas told Colorado Politics that the agency is continuing to evaluate the evolving situation and will make adjustments as needed.
"However," she said, "we are committed to continuing service for those who rely on us, like the transit dependent and health care professionals and others who are critical to fighting this virus."
RTD is not the only major metropolitan transit agency feeling the hit from COVID-19. Those in other urban areas, including Atlanta, the District of Columbia, New York City and San Francisco saw similar scrutiny from Fitch.
Amid a backdrop of social distancing, telecommuting and shelter-in-place orders, some agencies are reporting ridership declines as steep as 90%, Fitch said.
The credit rating agency “expects the impact on transit to continue to worsen and spread to more areas of the country in the near-term.” As a result, it’s calling for a “robust policy response” from federal and state governments.
Without significant outside support, Fitch suspects “the ratings of the most affected issuers could come under substantial downward pressure in the near-term.”
RTD is tracking its costs associated with COVID-19, Tonilas said, and working with local, state and federal officials "on processes to receive financial assistance."