Transportation Sector Bonded to Credit Crisis

By Karl Vilacoba

Jim Calpin is a successful public finance banker on Wall Street, but don’t ask him what’s next in this turbulent economic climate.

“We don’t know. The crystal ball at Merrill Lynch is broken,” Calpin told an audience of about 200 at “Beyond the Gas Tax: A Symposium on Funding Future Transportation Needs,” held Tuesday in Syracuse, N.Y. As he spoke, the Dow Jones was well on its way to a 508-point plunge for the day.

What Calpin can say for sure is that the credit crunch crisis is beginning to hamper transportation agencies’ ability to do business. If it continues, he said, it may cripple them.

Even agencies with AAA bond ratings are having trouble getting bond financing now, according to Calpin, who specializes in transportation infrastructure for Merrill Lynch. The funding they’ve been able to secure doesn’t stretch as far as it did a few months back. Calpin displayed a graph showing the dramatic rise in interest rates banks charge public agencies for bonds – the 5 or 6 percent charged in recent months is now closer to 9 or 10 percent in many cases. With their buying power sinking, agencies are going to have to do even less with their already tight budgets.

The indicators he’s seeing are not encouraging. Some of the financial sector’s largest bond insurers are going under fast. America’s financial fears are contagious and spreading globally. Not even tolling revenues are immune. In Orlando, collections are down about 15 percent, in part because unemployment is so bad, he said.

None of this is bound to make Congress’ job any easier drafting the next transportation funding bill.

“Something’s got to give,” Calpin said. “We’ve got to get a new playbook in Washington when we look at [SAFETEA-LU] re-authorization.”