Strong And Improved Financial Metrics Continued Into 2023

A comparison of performance across TIE asset classes shows that financial metrics continue to mirror demand, with transit and parking being slower to recover as remote work continued to negatively affect commuter activity.

S&P Global Ratings maintained 257 public ratings on U.S. not-for-profit TIE issuers as of Sept. 1, 2024. This report summarizes operational and financial trends for fiscal years 2019 to 2023 across our rated universe of airports, ports, toll facilities, mass transit, and parking issuers. We exclude stand-alone passenger facility charge and customer facility charge ratings from our median analysis given their narrow revenue streams and limited operations, which reduce the comparability of financial metrics relative to those of the broader TIE universe.

Full details of the medians are available through our interactive dashboard, here.

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U.S. not-for-profit TIE issuers across rating categories saw improved financial metrics in fiscal 2023. Despite 14% median growth in operating expenses, S&P Global Ratings-calculated median net revenue available for debt service increased, resulting in improved coverage, debt capacity, and cash reserves (table 2). However, financial metrics and demand trends have varied among both our rating categories and TIE asset classes, and our analysis examines trends for 2019 to 2023 across both of those dimensions.

Our analysis focuses on operating performance

Table 1 details the core financial metrics we consider in our "Global Not-For-Profit Transportation Infrastructure Enterprises" criteria, published Nov. 2, 2020, on RatingsDirect, and the ranges for our assessments. We note that our metrics focus on operating performance, and thus that calculations of net revenue available for debt service include operating and nonoperating revenue and exclude income statement line items such as nonrecurring grants (e.g., those used by airport and transit operators during the peak of the pandemic to meet fixed-cost obligations and satisfy rate covenants) and cash-basis carryover fund balances and coverage accounts. Also, while our coverage calculation typically represents a comparison of net revenue and total senior and subordinated debt service obligations, the calculation can sometimes include other recurring obligations or adjustments we consider O&M-like or debtlike.

Table 1

S&P Global Ratings transportation infrastructure enterprise criteria--financial metric ranges
	Extremely strong	Very strong	Strong	Adequate	Vulnerable	Highly vulnerable
Coverage (x)	>4.75	4.75-3.00	3.00-1.25	1.25-1.10	1.10-1.00	<1.00
Debt to net revenue (x)	<5.0	5.0-10.0	10.0-15.0	15.0-20.0	20.0-30.0	>30.0
Unrestricted days' cash on hand	>800	800-400	400-250	250-120	120-60	<60
Unrestricted reserves to debt (%)	>85	85-50	50-20	20-8	8-3	<3

Table 2 highlights key financial data across all not-for-profit TIE asset classes by fiscal year, and table 3 does so by rating category. Our analytical approach separately assesses operators' enterprise risk and financial risk profiles and considers our holistic view of overall creditworthiness, which includes a qualitative assessment not captured in this report. The means and medians in the tables below should not be considered thresholds to achieving a particular rating.

Table 2

U.S. transportation infrastructure sectorwide medians and means
	--Fiscal year (n=183)--
	2023	2022	2021	2020	2019
Total operating revenue ($000s)
Median	90,029	77,851	63,178	74,560	96,814
Mean	347,866	309,201	249,638	241,089	310,429
Total operating revenue annual % change
Median	9.8	23.8	(1.6)	(14.5)	3.6
Mean	10.7	27.2	(3.4)	(16.2)	4.7
Operating expenses ($000s)
Median	83,364	76,065	65,814	69,263	71,664
Mean	324,213	281,022	253,780	265,144	271,252
Total operating expense annual % change
Median	14.0	10.1	(2.8)	(0.2)	5.5
Mean	15.5	10.6	(1.6)	(1.9)	7.2
S&P Global Ratings net revenue ($000s)
Median	66,856	62,551	35,474	39,385	56,648
Mean	231,452	201,482	146,915	119,305	192,790
Coverage (x)
Median	2.02	1.79	1.37	1.27	1.83
Mean	3.24	2.95	2.03	1.92	2.7
Debt to net revenue (x)
Median	5.9	6.8	7.5	9.7	6.6
Mean	7.8	7.3	11.7	12.9	7.5
Debt ($000s)
Median	503,131	490,687	312,503	310,883	335,855
Mean	1,994,532	1,944,155	1,853,523	1,738,000	1,681,080
Unrestricted cash and investments ($000s)
Median	199,622	175,170	124,921	104,094	107,950
Mean	456,955	421,916	331,388	285,679	281,828
Unrestricted days' cash on hand
Median	663	648	607	490	465
Mean	951	909	884	777	714
Unrestricted reserves to debt (%)
Median	33	29	24	23	24
Mean	127	123	121	87	73
Note: Mean and median calculations exclude Williamson and St. Joseph County Airport Authority general obligation ratings.

Table 3

U.S. transportation infrastructure medians by rating category--fiscal 2023
	AAA (n=2)	AA (n=67)	A (n=102)	BBB (n=11)	Sectorwide
Total operating revenue ($000)	197,841	225,544	81,997	19,994	90,636
Total operating revenue annual % change	10	10	10	9	10
Operating expenses ($000)	630,783	293,873	43,753	11,262	85,030
Total operating expense annual % change	21	15	13	5	14
S&P Global Ratings net revenue	1,045,750	238,930	35,244	10,533	76,620
Coverage (x)	4.20	2.13	1.89	1.38	2.02
Debt to net revenue (x)	3.8	4.6	6.5	14.2	5.9
Debt ($000)	2,885,303	1,336,496	235,372	113,839	515,540
Unrestricted cash and investments ($000)	2,740,060	499,076	85,761	21,432	199,622
Unrestricted days’ cash on hand	1,847	811	599	533	674
Unrestricted reserves to debt (%)	84	36	29	9	33

Sectorwide Medians Remain Strong

Financial metrics by rating category

Coverage improved across all rating categories except 'AA' in fiscal 2023 (chart 1).  

• 'AA' rated issuers maintained strong median coverage of more than 2x, but median coverage declined slightly as median operating expenses and debt service increased as a result of debt issuances.
• 'A' and 'BBB' rated issuers maintain strong median coverage of 1.89x and 1.38x, respectively, up from fiscal 2022, as continued revenue growth generally offset higher expenses and median debt service remained relatively flat.

Debt capacity improved for all rating categories except 'BBB' (chart 2).  

• 'AA' rated issuers maintained extremely strong median debt to net revenue, despite higher median debt.
• 'A' rated issuers maintained very strong median debt to net revenue, improving slightly compared with fiscal 2022 as revenue continued to recover and as debt amortization offset higher operating expenses.
• 'BBB' rated issuers maintained strong median debt to net revenue, but debt capacity weakened slightly as a result of higher operating expenses.

Liquidity remained relatively stable-to-improving for all rating categories as rising debt and operating expenses partly offset increased cash reserves (chart 3).  

• Revenue growth and federal relief aid allowed management teams to bolster nominal cash reserves. However, our two key liquidity metrics--days' cash on hand and liquidity to debt--remained relatively stable across rating categories as increased operating expenses and debt outstanding offset higher cash balances.
• 'AA' rated issuers generally maintained extremely strong days' cash on hand, but performance compared with 2022 was mixed as some issuers continued to build up cash reserves and others drew down to fund capital.
• 'A' and 'BBB' rated issuers generally maintained very strong days' cash on hand.
• 'AA' and 'A' rated issuers maintained strong liquidity to debt, while 'BBB' rated issuers maintained adequate liquidity to debt.

Median operating expenses increased as a result of inflation, higher labor costs, and additional personnel needed to accommodate growing demand.  Operating expenses continued to see a material increase with double-digit median sectorwide growth in fiscal years 2022 and 2023. However, strong revenue growth offset rising expenses for most issuers, and we expect that stable-to-positive demand trends combined with rate increases will continue to support credit quality for transportation entities (chart 4). To the extent that demand tapers off, we would expect to see a slowdown in year-over-year expense increases.

Median total debt outstanding increased in 2023 for the 'AA' category and sectorwide but not for lower rating categories.  Approximately 23% of rated issuers issued additional new money debt in fiscal 2023 compared with more than 30% in 2022, as demonstrated by the increase in median debt outstanding for the sector and the 'AA' rating category (chart 5). Approximately 42% of issuers that issued debt in fiscal 2023 were rated in the 'AA' category, primarily consisting of mass transit systems, large hub airports, and large regional or statewide toll operators (chart 6). We expect increased project costs stemming from inflationary pressures to result in continued growth in capital expenditures and debt.

The airport asset class has the highest median debt outstanding at nearly $1.05 billion.  Airports are followed by the toll sector ($735 million), mass transit ($696 million), ports ($283 million), and parking ($36 million).

Demand Recovery Has Varied By Asset Class

Pandemic-related effects on demand and the pace of recovery have varied across our transportation asset classes, but overall fiscal 2023 activity trends were positive and most asset classes met or exceeded 2019 demand.

Air travel demand has recovered

After declining in fiscal years 2020 and 2021, enplanement showed strong growth in fiscal years 2022 and 2023, resulting in a complete rebound in demand in fiscal 2023 (charts 7 and 8). U.S. air travel demand has fully recovered for most airport operators--and performance has even exceeded pre-pandemic levels for some--allowing management to return its focus to the future. However, a few outliers have been slower to rebound, including those airports that serve metro areas more heavily affected by the decline in regional business travel, that are experiencing out-migration, or that recorded declining enplanements prior to the pandemic. For more information, see "U.S. Transportation Infrastructure Airport Update: Air Travel Rides The Jetstream, For Now," published June 18, 2024.

Mass transit sector view now stable despite low ridership challenges

Transit has been the slowest asset class to recover, with median ridership returning to approximately 63% of the 2019 level in fiscal 2023 (charts 7 and 8). Remote work patterns and, to some extent, passengers' reluctance to return to mass transit (because of reliability or safety concerns) have disrupted demand. Additionally, the pace of recovery has varied between regions and modes of transit. Commuter rail systems saw weaker recovery as a result of remote working trends, while bus and subway ridership have generally performed better. For more information, see "U.S. Transportation Infrastructure Transit Update: Sector View Now Stable As Dedicated Tax Growth Mitigates Lower Ridership Revenue," published Sept. 11, 2024.

Toll traffic remains resilient

Toll roads have been among the most resilient transportation infrastructure asset classes in recent years given the quick rebound in demand, supported by steady commercial vehicle traffic. Most toll road operators recovered to pre-pandemic activity in 2022 and continued to see more modest growth in fiscal 2023 that we expect will continue in 2024 (charts 7 and 8). For more information and credit highlights, see "U.S. Transportation Infrastructure Toll Sector Report Card: Resilient Demand And Higher Tolls Underpin Credit Strength," published Aug. 17, 2023.

Port volumes mirror the economy

Fiscal 2022 median tonnage was 109% of the 2019 level, as the port sector benefited more than did any other U.S. transportation infrastructure sector from the post-peak-pandemic economy and changes in consumer behavior. However, fiscal 2023 median tonnage declined to 103% of the 2019 level (charts 7 and 8) as activity slowed in late 2022, with inflationary pressures and the increasing possibility of a recession in 2023 adversely affecting consumer purchasing power and demand for goods. We expect that fiscal 2024 will yield a swing back to growth in maritime cargo and container volume as recession fears abate.

Recovery of parking utilization varies by location and user

While slower to recover initially, parking continued to improve in 2023 as general mobility trends improved, economic conditions remained positive, and remote workers increasingly returned to the office. By its very nature, parking activity is largely site-specific, and recovery trends have varied depending on local economic conditions, employment and retail trends, events and entertainment venues, and users' behavioral patterns. Unlike utilization, operating revenue per space in 2023 (charts 7 and 8) exceeded the 2019 level, as many parking systems increased rates to offset lower transactions. Some parking operators also saw a shift in utilization patterns and revenue (e.g., increased weekend parking transactions offset lower weekday parking), and some parking systems increased daily parking revenue, offsetting declines in monthly parking revenue, as hybrid workers commuting two to three times a week are choosing to pay daily rates rather than purchase a monthly pass. We expect to see a continued recovery in transactions and revenue across the rated parking universe in 2024, but commuter-based demand is unlikely to return to pre-pandemic levels given behavioral changes and trends related to working from home.

Select Fiscal 2023 Medians By Transportation Asset Class

Financial metrics vary across our transportation subsectors. Key observations from our analysis of median values of key financial metrics by asset class--airports, mass transit, toll roads, ports, and parking--are detailed below.

Airport medians

The return of large capital programs and newly renegotiated airline use and lease agreements in support of these capital programs suggest a trend of higher debt metrics but also, in some instances, improved coverage as business terms have been modified to allow for more recovery of fixed costs in the airline rate base.

Improving coverage trends continue.  After rebounding to pre-pandemic levels in fiscal 2022, median airport financial metrics, specifically coverage and debt to net revenue, continued to improve in fiscal 2023 (tables 4 and 5). More passengers, higher rates, and volume-linked growth in nonaeronautical sources such as parking and concessions combined with inflationary increases helped boost top line revenue. We expect fiscal 2024 median debt service coverage (DSC) and debt to net revenue will remain comparable or possibly weaken slightly as debt issuances in 2022 through 2024 result in higher annual debt service along with rising operating expenses.

Table 4

Select airport medians
	--Fiscal year (n=58)--
	2023	2022	2021	2020	2019
Total operating revenue ($000s)	209,981	189,518	138,987	137,982	165,691
Operating expenses ($000s)	120,122	104,783	81,175	90,931	94,794
S&P Global Ratings net revenue ($000s)	126,768	96,069	50,580	55,043	85,649
Coverage (x)	1.94	1.50	1.03	1.06	1.58
Debt to net revenue (x)	7.5	9.5	11.2	11.4	7.9
Debt ($000s)	1,045,783	1,057,063	914,811	918,639	896,133
Unrestricted cash and investments ($000s)	223,860	234,431	161,873	144,629	146,135
Unrestricted days' cash on hand	638	652	605	489	527
Unrestricted reserves to debt (%)	30	25	23	22	23
EPAX (000s)	6,814	6,122	3,744	4,839	6,832
EPAX origin-and-destination share (%)	94	95	95	95	94
Top airline EPAX market share (%)	38	38	41	41	42
Cost per EPAX ($)	9.71	9.91	13.7	14.28	8.73
Debt per EPAX ($)	105	125	189	157	98
Note: Mean and median calculations exclude Williamson and St. Joseph County Airport Authority general obligation ratings. EPAX--Enplaned passengers.

Table 5

Select airport medians by rating category--fiscal 2023
	AA (n=17)	A (n=40)	BBB (n=1)	All airports
Total operating revenue ($000s)	560,247	123,653	29,722	209,981
Operating expenses ($000s)	371,974	84,197	21,155	120,122
S&P Global Ratings net revenue ($000s)	279,615	61,680	12,948	126,768
Coverage (x)	1.97	1.92	1.85	1.94
Debt to net revenue (x)	7.9	7.5	5.2	7.5
Debt ($000s)	2,464,986	496,407	67,917	1,045,783
Unrestricted cash and investments ($000)	689,278	131,134	28,122	223,860
Unrestricted days' cash on hand	811	581	485	638
Unrestricted reserves to debt (%)	30	28	41	30
EPAX (000s)	25,268	4,913	621	6,814
EPAX origin-and-destination share (%)	78	95	98	94
Top airline EPAX market share (%)	41	38	50	38
Cost per EPAX ($)	9.72	9.33	13.87	9.71
Debt per EPAX ($)	116	99	109	105
Note: Mean and median calculations exclude Williamson and St. Joseph County Airport Authority general obligation ratings. EPAX--Enplaned passengers.

Debt capacity improved as revenue growth continued and debt issuance slowed.  Specifically, median debt to net revenue for the overall airport sector and across all rating categories improved in fiscal 2023 but remained near 5x to 10x as increases in debt outstanding in fiscal 2022 and rising operating expenses partly offset revenue growth. Median debt outstanding for the overall sector and across all rating categories declined as debt issuance slowed in fiscal 2023 after many of our rated large hub airports issued debt in fiscal 2022 to finance sizable capital plans. We anticipate some weakening of debt capacity in 2024 given a large increase in debt issuance across the sector in 2024.

Median operating expenses increased approximately 16% in fiscal 2023, exceeding peak expenses in 2022 (chart 9).  Although median operating expenses declined in fiscal years 2020 and 2021, expenses surpassed those of 2019 in fiscal 2022 as a result of inflation and higher labor costs, and those cost escalations continued into 2023 (table 4), with 2024 likely to show a continuation of this trend.

Although airports exhausted remaining federal relief aid, cash reserves remained stable-to-improving as a result of favorable revenue growth.  Despite higher operating expenses, median unrestricted reserves and days' cash remained relatively stable-to-improving, as demonstrated by the overall sector median as well as medians for airports in all rating categories, with days' cash remaining very strong at 400 to 800 (tables 4 and 5). Median unrestricted cash and investments increased approximately 12%, supported by a 13% increase in operating revenue (chart 9).

Mass transit medians

The impact of ridership declines on financial metrics has varied across the sector. Transit providers whose tax revenue makes up a large majority of their revenue maintained favorable metrics through the pandemic, while operators that have historically relied on farebox revenue leaned more on federal relief aid to cover operations and debt obligations.

Overall financial metrics remained relatively stable in fiscal 2023 as sales tax revenue growth slowed, coupled with a continued recovery in fare revenue and expense increases (chart 10).  In particular, median DSC and debt to net revenue for the overall transit sector and for each rating category remained relatively stable or weakened slightly, as rising expenses pressured net revenue (tables 6 and 7). Despite recovering-but-still-weaker ridership and rising expenses resulting from inflation, our mass transit sector view is stable given our expectation that dedicated tax revenue growth and operators' ability to adjust service levels and expenses to restore fiscal structural operating fund balance will continue to support financial metrics comparable to historical levels.

Favorable tax revenue performance continues to provide revenue stability for transit operators.   Specifically, higher-rated mass transit operators with significant tax revenue support were able to maintain coverage and debt to net revenue generally near pre-pandemic levels. We include tax revenue as recurring nonoperating revenue available for operations and debt service in our calculations. For 'AAA' and 'AA' rated mass transit operators, tax revenue generally makes up more than 60% of total revenue, and this provided credit stability in 2020 through 2023. Following double-digit growth in 2021 and 2022, median sales tax revenue percent growth declined in 2023 to 5% as a result of the slowing economy and consumer spending (chart 10). We expect that fiscal 2024 dedicated tax revenue will remain relatively stable-to-improving.

'A' rated mass transit operators' coverage declined to less than 1x in 2023.  'A' rated mass transit operators rely more on fare revenue, as net tax revenue generally made up less than 50% of total pre-pandemic revenue. Coverage for 'A' rated mass transit systems fell to less than 1x, reflecting issuers such as the New York Metropolitan Transportation Authority (A-/Positive), San Francisco Bay Area Rapid Transit District (A+/Negative), and San Francisco Municipal Transportation Agency (A+/Negative), which produced insufficient S&P Global Ratings-calculated coverage in fiscal 2023 (excluding federal relief aid).

Liquidity positions remained relatively stable-to-declining as issuers resumed capital projects, expenses increased, and fewer deposits were made to reserves (chart 10).  More specifically, median unrestricted days' cash on hand declined slightly in fiscal 2023 as a result of higher expenses and fewer deposits being made to unrestricted reserves as federal aid was exhausted, tax revenue growth slowed, and issuers resumed capital projects (tables 6 and 7). But overall, relative to pre-pandemic levels, median cash and investments have more than tripled.

Table 6

Select mass transit medians
	--Fiscal year (n=31)--
	2023	2022	2021	2020	2019
Total operating revenue ($000s)	45,959	38,907	35,174	54,487	75,295
Operating expenses ($000s)	461,417	334,474	321,725	316,176	303,689
S&P Global Ratings net revenue ($000s)	86,270	97,685	56,224	45,669	71,530
Coverage (x)	1.52	1.96	1.68	0.97	2.08
Debt to net revenue (x)	2.7	2.6	3.3	6.8	4.6
Debt ($000s)	695,711	600,451	544,147	474,825	490,844
Unrestricted cash and investments ($000s)	438,457	383,614	271,540	184,797	136,194
Unrestricted days' cash on hand	455	482	338	252	195
Unrestricted reserves to debt (%)	105	74	58	52	49
Net tax revenue ($000s)	362,538	414,410	275,511	241,154	204,249
Net tax revenue % change	5	13	12	3	7
Net tax revenue as share of total revenue (%)	76	73	80	70	65
Farebox revenue ($000s)	32,617	28,928	20,449	34,880	53,757
Ridership (000s)	29,547	22,874	17,800	27,806	36,642

Table 7

Select mass transit medians by rating category--fiscal 2023
	AAA(n=2)	AA(n=21)	A(n=8)	All transit
Total operating revenues ($000s)	197,841	37,959	134,173	45,959
Operating expenses ($000s)	630,783	352,777	600,361	461,417
S&P Global Ratings net revenue ($000s)	1,045,750	116,083	19,580	86,270
Coverage (x)	4.20	1.79	0.78	1.52
Debt to net revenue (x)	3.8	2.7	12.9	2.7
Debt ($000)	2,885,303	160,830	618,278	695,711
Unrestricted cash and investments ($000s)	2,740,060	419,805	323,190	438,457
Unrestricted days’ cash on hand	1847	472	245	455
Unrestricted reserves to debt (%)	84	112	41	105
Net tax revenues($000s)	1,304,411	346,787	224,086	362,538
Net tax revenue % change	11	5	6	5
Net tax revenues as share of total revenue (%)	72	78	50	76
Farebox revenue ($000)	47,306	27,305	65,567	32,617
Ridership (000s)	41,089	24,332	32,501	29,547

Toll road medians

Financial metrics remained resilient through 2023 despite higher expenses and increased debt loads. The combined effect of higher traffic demand and toll increases in fiscal 2023 resulted in 5% median growth in operating revenue, supporting stable-to-improving metrics across the sector (chart 11).

DSC was maintained near historical levels as a result of transaction growth and toll increases accompanied by higher O&M expenses.  Median DSC remained stable, with 11% median growth in operating expenses offsetting revenue growth. Median operating expenses reached a historical peak given the rebound in demand and inflationary cost increases (table 8).

Table 8

Select toll road medians
	--Fiscal year (n=53)--
	2023	2022	2021	2020	2019
Total operating revenue ($000s)	163,647	159,105	122,136	120,449	135,420
Operating expenses ($000s)	48,192	45,374	36,016	41,060	43,709
S&P Global Ratings net revenue ($000s)	100,638	95,250	69,603	73,298	73,168
Coverage (x)	1.90	1.80	1.57	1.65	1.85
Debt to net revenue (x)	6.1	6.8	7.6	10.1	6.9
Debt to EBIDA (x)	6.6	6.9	7.7	11.9	7.8
Debt ($000s)	734,891	714,827	711,456	692,940	555,202
Unrestricted cash and investments ($000s)	206,520	162,207	152,816	121,740	125,260
Unrestricted days' cash on hand	1,042	978	976	1,031	725
Unrestricted reserves to debt (%)	18	14	17	14	16
Toll transactions (000s)	46,995	45,860	44,761	39,310	52,450

Overall debt increased, but debt capacity as measured by debt to EBIDA generally remained comparable to 2022 across all rating categories.  Median absolute debt outstanding has increased since 2019 as debt associated with capital projects was issued. We expect that increased capital project costs stemming from inflationary pressures will result in higher debt supported by revenue growth from strong demand trends and toll rate increases.

While 'AA' and 'A' rated toll roads maintained very strong debt capacity through 2023, the median debt capacity for 'BBB' rated toll roads is generally strong-to-adequate as a result of weaker financial margins. Approximately 50% of 'BBB' rated toll roads are single-asset bridges or roads, explaining their weaker margins and debt capacity relative to those of higher-rated peers (table 9).

Table 9

Select toll road medians by rating category--fiscal 2023
	AA (n=18)	A (n=29)	BBB (n=6)	All tolls
Total operating revenue ($000s)	738,774	75,244	45,606	163,647
Operating expenses ($000s)	202,338	19,853	13,697	48,192
S&P net revenue ($000s)	513,784	34,306	34,576	100,638
Coverage (x)	2.43	1.84	1.86	1.90
Debt to net revenue (x)	5.0	6.5	13.7	6.1
Debt to EBIDA (x)	5.1	7.0	16.1	6.6
Debt ($000s)	2,207,126	301,307	609,347	734,891
Unrestricted cash and investments ($000s)	668,556	77,467	49,873	206,520
Unrestricted days' cash on hand	1,079	930	1,403	1,042
Unrestricted reserves to debt (%)	17	25	11	18
Toll transaction	184,505	20,570	10,343	46,995

Management teams continue to increase liquidity positions to mitigate rising construction costs and operating expenses.  Despite increases in operating expenses in 2023, median unrestricted days' cash on hand continued to improve across all rating categories and the sector as management teams continued to build reserves. The rapid recovery in transactions and operating revenue allowed issuers to build cash reserves as revenue exceeded budgeted amounts significantly in fiscal years 2022 and 2023.

Port medians

Rated ports have historically maintained higher financial metrics than those of other not-for-profit transportation asset classes because of their exposure and susceptibility to swings in commodity prices affecting cargo volumes, often-rapid changes in the business cycle and global economy, and trade policy variations over time. Also, landlord port operators often have lower operating expenses, allowing for higher coverage.

Overall financial metrics remained relatively stable as activity and revenue growth slowed, coupled with higher expenses.  As activity slowed in late 2022 and into fiscal 2023, ports experienced a 2% median decline in tonnage and 5% growth in operating revenue, while operating expenses increased 14% (chart 12). As a result, fiscal 2023 median coverage declined but debt capacity and liquidity remained relatively stable (table 10).

Table 10

Select port medians
	--Fiscal year (n=24)--
	2023	2022	2021	2020	2,019
Total operating revenue ($000s)	130,305	108,296	96,749	101,866	109,611
Operating expenses ($000s)	89,715	59,219	53,727	56,993	53,800
S&P Global Ratings net revenue ($000s)	68,762	49,529	30,440	29,264	26,028
Coverage (x)	2.76	3.23	2.48	2.29	2.77
Debt to net revenue (x)	3.1	4.1	4.8	4.9	4.5
Debt to EBIDA (x)	4.8	4.4	4.8	6.4	5.2
Debt ($000s)	283,375	260370	195891	141797	137,697
Unrestricted cash and investments ($000s)	102,100	81,945	67,930	64,172	63,352
Unrestricted days' cash on hand	815	815	733	571	518
Unrestricted reserves to debt (%)	55	72	57	49	48
Total tonnage (000s)	16,594	12,995	14,794	11,166	8,285

Revenue growth continues to offset increased debt through 2023, supporting extremely strong debt capacity.  In addition, many projects are constructed for existing shipping line tenants under agreements that provide for minimum annual guaranteed revenue sufficient to support debt.

Days' cash on hand remained extremely strong as median unrestricted cash and investments grew 12% (table 10 and chart 12).  Strong demand and revenue performance have allowed issuers to continue to build cash reserves with growth in unrestricted cash offsetting higher operating expenses.

'AA' rated ports generally maintain stronger financial metrics as a result of their larger size, activity volumes, and financial margins compared with 'A' rated ports.  'AA' rated port issuers generally maintain DSC that we consider very-strong-to-extremely strong and debt capacity that we view as extremely strong, while 'A' rated ports generally maintain weaker DSC and debt to net revenue, as reflected in the medians by category (table 11). The 'AA' rated ports are the largest in the U.S., and many receive some form of tax revenue supporting their operations. The 'A' rated ports include those that specialize in a niche market, are concentrated in one commodity, have exposure to tourism revenue, or are relatively small in the sector.

Table 11

Select port medians by rating category--fiscal 2023
	AA(n=9)	A(n=15)	All ports
Total operating revenue ($000s)	225,544	109,526	130,305
Operating expenses ($000s)	92,317	56,041	89,715
S&P Global Ratings revenue	149,129	44,612	80,682
Coverage (x)	5.45	2.38	2.76
Debt to net revenue (x)	2.9	5.2	3.1
Debt to EBIDA(x)	3.9	6.5	4.8
Debt ($000s)	503,131	262,520	283,375
Unrestricted cash and investments ($000s)	281,405	77,769	102,100
Unrestricted days' cash on hand	1568	472	815
Unrestricted reserves to debt (%)	75	47	55
Total tonnage	40,106	11,154	16,594

Parking medians

Parking, as with transit, has faced a slower recovery than have other U.S. transportation infrastructure sectors. Overall median financial metrics improved and, in some cases, returned to 2019 levels in fiscal 2023 as utilization and revenue continued to rebound. A few systems are lagging as a result of location and type of user served and the extent to which operators have been able to increase rates to offset lower demand compared with before the pandemic.

Despite higher expenses, overall median coverage and debt capacity improved as a result of revenue growth from parking rate increases and improved utilization (table 12).  Specifically, median coverage improved to strong levels (more than 1.25x), comparable with 2019 pre-pandemic levels, from adequate (1.1x to 1.25x). While parking utilization has improved, expenses have grown as a result of inflation, higher labor costs, and additional personnel needed to accommodate recovering demand. We expect that this could pressure financial margins in 2024 (chart 13).

Table 12

Select parking medians
	--Fiscal year (n=18)--
	2023	2022	2021	2020	2019
Total operating revenue ($000s)	17,568	11,035	6,623	7,744	10,960
Operating expenses ($000s)	7,846	4,888	4,963	4,916	5,539
S&P Global Ratings net revenue ($000s)	6,609	4,334	2,819	3,734	5,723
Coverage (x)	1.43	1.12	0.98	1.07	1.33
Debt to net revenue (x)	5.2	7.9	6.6	9.1	4.9
Debt to EBIDA (x)	6.2	9.7	18.9	16.8	6.1
Debt ($000s)	36,128	39,101	36,730	38,509	38,180
Unrestricted cash and investments ($000s)	2,818	3,198	3,018	3,260	3,304
Unrestricted days' cash on hand	172	169	258	231	296
Unrestricted reserves to debt (%)	14	16	12	18	20
Operating revenue per space ($)	2,785	2,304	1,545	1,585	2,115

'BBB' rating category parking systems maintain significantly weaker financial metrics compared with those of 'AA' and 'A' rated parking systems.  Specifically, 'AA' and 'A' rating category median coverage and debt to EBIDA are strong and very strong, respectively, as a result of those issuers' larger size and higher financial margins. Comparatively, median coverage for 'BBB' category systems remains near 1x, still below adequate pre-pandemic levels. Median debt to net revenue for the 'BBB' rating category is strong, comparable with the 2019 level.

Coverage varies depending on flow of funds.  Coverage and liquidity can vary across the parking sector, as many parking systems are managed by the city or county and have an open flow-of-funds structure whereby excess parking revenue can be transferred out to the general fund for any use not related to the parking system. We treat these transfers out of the enterprise as debtlike in our coverage calculation. Of our rated parking systems, three are break-even enterprises that transfer out all excess revenue to the general fund, resulting in 1x DSC (S&P Global Ratings-calculated), and many others maintain slim coverage because of similar transfers out to the related government. These systems generally maintain weaker liquidity as well. However, we note that during the pandemic, these parking systems benefited from city or county support in the form of transfers from the city's or county's general fund or federal aid allocations to offset revenue shortfalls and meet debt service payments. These related governments were not legally obligated to provide financial support.

Median unrestricted cash increased 13%, offsetting expense increases and supporting generally stable days' cash 2023 (chart 13).  Overall, median unrestricted days' cash on hand improved but remained at levels we consider adequate, with deposits to reserves mitigating the effects of higher expenses (table 13). However, we anticipate that higher expenses and capital needs could pressure liquidity positions in fiscal 2024.

Table 13

Select parking medians by rating category--fiscal 2023
	AA (n=2)	A (n=11)	BBB (n=4)	All Parkings
Total operating revenue ($000s)	87,065	16,197	10,583	16,532
Operating expenses ($000s)	42,208	8,911	7,616	7,118
S&P Global Ratings net revenue ($000s)	56,117	6,569	1,593	6,635
Coverage (x)	1.91	1.85	1.06	1.34
Debt to net revenue (x)	4.6	3.9	15.0	4.9
Debt to EBIDA (x)	4.8	4.6	17.2	5.6
Debt ($000)	181,667	33,448	47,646	38,180
Unrestricted cash and investments ($000s)	190,068	4,257	1,593	2,818
Unrestricted days' cash on hand	885	248	162	172
Unrestricted reserves to debt (%)	63	31	4	14
Operating revenue per parking space	4,094	2,550	3,480	2,785

Rating Actions And Distribution

Rating actions across all transportation infrastructure asset classes were mostly positive

We have seen a continuation of generally positive rating trends across TIE asset classes. The past 12 months yielded 32 rating upgrades and one downgrade across asset classes (chart 14). Parking was the only subsector with a negative rating action over the past 12 months given slow recoveries and financial pressures after the worst of the pandemic. The mass transit sector, however, saw some upgrades largely as a result of significant state, local, and federal support and favorable tax revenue growth over the past few years. Toll roads had the highest number of positive rating actions, followed by airports, as airport ratings were raised back to or higher than pre-pandemic levels (chart 15). S&P Global Ratings saw continued resilience and stability across rated not-for-profit port and toll road operators, with no downgrades since the start of the pandemic in 2020.

Approximately 97% of ratings are at or above pre-pandemic levels, with rating actions attributed to improving demand and financial metrics, project completion, reduced start-up risks, and tax support.   Seventy-one percent of all U.S. transportation infrastructure ratings are at their Jan. 1, 2020, levels (chart 15)and approximately 26% of all TIE ratings are above their pre-pandemic levels with a significant number of positive rating actions in the toll road sector over the past 12 months, reflecting the sector's operating resiliency and improving financial metrics. Only 3% of all ratings remain below their pre-pandemic levels. In particular, we note that a significant number of airport ratings are above their pre-pandemic levels as well, largely as a result of robust air travel demand and the accompanying improvement in financial metrics. For more information, see "U.S. And Canadian Airport Ratings and Outlooks: Current List," published Sept. 5, 2024.

As a result, the U.S. transportation infrastructure sector median rating has improved to 'A+' from 'A' since Jan. 1, 2020 (table 14). At the asset class level, the median rating improved for four of our six asset classes. The median rating improved for toll roads and parking. The median rating for parking returned to 'A', in line with the Jan. 1, 2020, median, as three positive rating actions occurred over the past 12 months.

Table 14

Median U.S. transportation infrastructure enterprise ratings as of Sept. 1, 2024, Sept. 1, 2023, and Jan. 1, 2020
	As of Sept. 1, 2024	As of Sept. 1, 2023	As of Jan. 1, 2020
All U.S. not-for-profit transportation infrastructure	A+	A+	A
Airports	A+	A+	A
Special facilities	A	A	A
Ports	A+	A+	A
Parking	A	A-	A
Toll roads	A+	A	A
Transit	AA-	AA-	AA-

Continued increase in outlook stability across most transportation infrastructure asset classes.  The prevalence of stable outlooks continues, with 97% of TIE ratings maintaining a stable outlook, up from 91% as of September 2023. For more information, see "Outlook For U.S. Not-For-Profit Transportation Infrastructure: Back To The Future For Most Operators, While Mass Transit Minds The Gap," published Jan. 10, 2024.

Outlooks are primarily stable in transportation sectors, with transit being the only sector with negative outlooks.  Across the U.S. not-for-profit TIE sector, outlooks are mostly stable at 97%, while 2% are positive and 1% are negative as of Sept. 1, 2024 (chart 16). Mass transit makes up the sector's negative outlooks, as demand and financial metrics materially declined as a result of the pandemic and have recovered more slowly than have those for other U.S. transportation infrastructure sectors. Ports, toll roads, transit, and parking all have positive rating outlooks (see chart 17).

Most TIE sector ratings are high-investment-grade, in the 'A' rating category or above, as a result of strong financial metrics, often dominant market positions and generally stable demand trends.  The majority of U.S. TIE ratings are in the 'AA' and 'A' rating categories (90%), reflecting favorable market positions and financial metrics, while only 1% of ratings are speculative-grade. There is some variation between asset classes, although most TIE ratings are 'A+' and 'A' (charts 18 and 19):

• Approximately 97% of port ratings are either 'AA' (47%) or 'A' (50%), reflecting their highly essential nature and generally stronger financial metrics compared with other U.S. transportation infrastructure asset classes.
• Approximately 60% of toll road ratings are in the 'A' category. 'AA' rated toll roads primarily consist of large, statewide systems such as Florida's Turnpike Enterprise and the New Jersey Turnpike Authority. Most toll roads in the 'BBB' rating category are single-asset systems and/or start-up toll roads with significant capital needs and high leverage.
• Seventy percent of airport and special facility ratings are in the 'A' category, while 24% are in the 'AA' category, which includes large-hub airports with favorable competitive positions providing an essential service to their region and with strong-to-very-strong financial metrics.
• Mass transit ratings tend to be higher given significant local, state, and federal government financial support in the form of grants and dedicated tax revenue streams, as is evident in that 7% of our transit ratings are in the 'AAA' category, 50% are in the 'AA' category, and the remaining 43% are in the 'A' category. We note that no transit issuers have an issuer credit rating lower than 'A-' following our positive rating action on the New York Metropolitan Transportation Authority's transit system on Oct. 3, 2023.
• The parking sector tends to be lower-rated: 91% of parking ratings are 'A+' or lower, with 4% speculative-grade and only 9% rated 'AA-' (Texas Medical Center and Baltimore Mayor & City Council).

Primary Credit Analyst:	Kayla Smith, Englewood + 1 (303) 721 4450; kayla.smith@spglobal.com
Secondary Contacts:	Kurt E Forsgren, Boston + 1 (617) 530 8308; kurt.forsgren@spglobal.com
	Andrew J Stafford, New York + 212-438-1937; andrew.stafford1@spglobal.com
Research Contributors:	Ritesh Bagmar, CRISIL Global Analytical Center, an S&P affiliate, Pune
	Nisha Gujaran, CRISIL Global Analytical Center, an S&P affiliate, Mumbai
	Romi Pandey, CRISIL Global Analytical Center, an S&P affiliate, Pune