April 2, 2012

Report: Uncertain fed funds may delay transportation projects

With the Congressional focus on reducing the budget deficit, Standard & Poor's Ratings Services believes future funding for transportation projects may be lower and erratic, according to a report published on RatingsDirect.

The report, titled, "Increasingly Unpredictable Federal Funding Could Stall U.S. Transportation Infrastructure Projects," says that since the start of the last recession, state and federal funding for transportation infrastructure has become increasingly unpredictable. This can result in a domino effect of severe consequences, to the economy and to public safety.

The FAA shutdown last August heightened concerns about the future of federally funded projects of all types, not just airports. Currently, the surface transportation bill remains mired in uncertainty. Holdups in funding reauthorizations and/or significant cuts in infrastructure programs are delaying some projects and forcing others to be scaled back.

In addition, numerous economists are forecasting prolonged weak economic growth and high fuel costs. The combination of reduced or unpredictable federal support and lower demand because of the shaky economy could result in entities' deferring maintenance projects that would keep the nation's transportation infrastructure in good repair. Such deferrals could hurt an entity's credit if capital costs escalate over time, putting the system at risk. Conversely, proceeding with such projects could also hurt the credit rating if the resulting liquidity and debt levels are not already reflected in the rating, according to the report.  

The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (212) 438-7280 or sending an e-mail to research_request@standardandpoors.com. Ratings information can also be found on Standard & Poor's Web site by using the Ratings search box located in the left column at www.standardandpoors.com.

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