Fitch Places South Jersey Transportation Auth's Transportation Revenue Bonds on Negative Watch

Published: 2026-05-12 06:51:14 ET FLYY

Published on 05/12/2026 at 06:51 am EDT

Fitch Ratings has placed South Jersey Transportation Authority's (SJTA) senior and subordinate transportation system revenue bonds on Rating Watch Negative (RWN).

SJTA's senior transportation system revenue bonds are rated at 'BBB+' and subordinate transportation system revenue bonds are rated 'BBB-'.

The RWN placement reflects the potential for a downgrade as Fitch incorporates the financial impact of the recent shutdown of Spirit Airlines (Spirit). Spirit accounted for approximately 76% of traffic at Atlantic City International Airport (ACY) as of March 31, 2026, and its departure temporarily leaves the airport without daily service. While Fitch expects the three remaining carriers-American, Breeze, and Allegiant-to help mitigate the loss of service, Fitch believes the airport's operating deficit could increase, which could weaken the authority's overall financial position.

The Atlantic City Expressway (ACE) is expected to generate sufficient toll revenue to provide a financial cushion while also supporting ACY. However, the loss of service could ultimately impair SJTA's financial metrics below Fitch's sensitivities because the 10-year average senior and total DSCR under Fitch rating cases is 1.8x before Spirit's departure is incorporated.

Fitch's analyses do not yet incorporate the potential negative pressure on the system or the Authority's risk mitigation measures. Fitch expects to speak with senior leadership by the end of the month and will continue to monitor developments. Fitch will resolve the RWN once sufficient information is available to assess the financial impact on the system and to update its cases.

KEY RATING DRIVERS

Revenue Risk - Volume - Weaker

Narrow Catchment Area

The authority's anchor asset, the ACE, is exposed to leisure-oriented traffic, which depends on the health of the Atlantic City gaming industry and visitors to the southern New Jersey seashore resort towns. Traffic on the expressway has experienced greater volatility during past economic downturns and has declined due to increased gaming competition in the region, but has stabilized over the past decade (excluding pandemic years). Fitch considers current toll rates moderate relative to peers.

Revenue Risk - Price - Midrange

Moderate Rate-Making Flexibility

SJTA benefits from legal authority to change toll rates as needed. The authority has historically demonstrated willingness to raise rates when debt service coverage has declined or prior to the development of a large capital program, but has often faced political pushback, which resulted in infrequent toll hikes. The implementation of an annual indexing policy that began in 2022 mitigates the risk of political interference in rate setting. Nevertheless, some uncertainty remains about the level of political and user support for future rate increases above inflation.

Infrastructure Dev. & Renewal - Midrange

Sizable Discretionary Capital Program

SJTA's 10-year capital plan focuses on bridge and pavement rehabilitation, congestion relief projects and airport renovations. The authority can adjust the plan to reflect economic conditions and funds it largely funded with prior bond proceeds, passenger and customer facility charges (PFCs and CFCs, respectively), reserves and grants. The Spirit cessation could reduce capital investment if enplanements fall materially, lowering PFCs and CFCs.

Debt Structure - 1 - Stronger; Debt Structure - 2 - Midrange

Fixed-Rate Debt

The authority has two liens of debt, both with fixed-rate and fully amortizing debt profiles. Total debt service requirements remain flat at around $59 million through 2050. Cash-funded debt service reserve funds (DSRF) for the senior lien and the subordinate lien further support the debt. The subordinate lien's weak, sum-sufficient rate covenant and structural subordination provide fewer protections for bondholders, resulting in a two-notch distinction between ratings.

Peer Analysis

SJTA's most comparable peers are Osceola County (Osceola; BBB-/Stable), Florida's Parkway and Rickenbacker Causeway, Florida (Rickenbacker; BBB+/Stable). All three are standalone entities that have limited catchment areas and above-average volatility due to their exposure to the leisure sector. However, Rickenbacker depends more on discretionary travel with over 90% leisure traffic, a narrower revenue base and lower liquidity. This is offset by Rickenbacker's higher DSCR levels under the rating case and lower leverage. SJTA is projected to have higher coverage levels than Osceola, which supports the higher rating on the senior lien.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

Deterioration of DSCR profile below 1.6x for the senior lien and 1.4x for all-debt on a sustained basis due to traffic and revenue underperformance, increases in operating expenses and/or additional borrowing used to fund future capital projects. This compares to current Fitch rating case 10-year average senior and total DSCRs of 1.8x and 1.8x, respectively;

Failure to backfill sufficient air service leading to greater airport deficits that materially impair the authority's cash flows;

Increased subsidies for non-expressway activities, which may have a materially negative impact on liquidity.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

The RWN could be resolved with a Stable Outlook if the authority provides structural or financial risk mitigation that supports its ability to maintain financial metrics consistent with the current rating level.

Upward rating migration is unlikely given the asset's narrow revenue base and exposure to discretionary leisure traffic.

Financial Profile

The expressway is expected to generate sufficient toll revenue to provide financial cushion while supporting ACY, which may operate at a substantial deficit because of the elimination of Spirit service. Fitch's rating case coverage averages 1.8x for both senior debt and total debt over the 10-year projection period before the incorporation of Spirit effects from its cessation. The authority also benefits from robust unrestricted cash levels, equivalent to over 600 days cash on hand.

SECURITY

Senior bonds are secured by pledged revenue after provision for an operating reserve totaling 15% of pledged project operating expenses. Pledged revenue primarily includes toll revenue from the expressway, as well as certain parking fees. Current investment income is also pledged, along with fund balances. Airport revenue generated to cover debt service on bonds issued to fund airport projects is also pledged.

Unlike other transactions, the subordinate bonds are paid not only after senior debt service obligations, but also rank subordinate to a DSRF and rehabilitation and repair fund. Additionally, the subordinate bonds have a weak sum sufficient rate covenant.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.

RATING ACTIONS

Entity / Debt

Rating

Prior

South Jersey Transportation Authority (NJ)

South Jersey Transportation Authority (NJ) /Toll Revenues - First Lien/1 LT

BBB+

Rating Watch On

BBB+

South Jersey Transportation Authority (NJ) /Toll Revenues - Second Lien/2 LT

BBB-

Rating Watch On

BBB-

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APPLICABLE CRITERIA

Transportation Infrastructure Rating Criteria (pub. 07 Jan 2025) (including rating assumption sensitivity)

Infrastructure & Project Finance Rating Criteria (pub. 15 Nov 2025) (including rating assumption sensitivity)

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