2009-11-11 22:55:02 -

Fitch Ratings assigns an 'A-' rating to Philadelphia Parking Authority's (PPA) approximately $130 million airport parking revenue bonds, series 2009. Bond proceeds will be used to refund all of the authority's outstanding 1999 airport parking revenue bonds and fund a debt service reserve. The authority expects pricing to occur during the week of Nov.
16. In addition, Fitch affirms PPA's approximately $195 million airport parking revenue bonds outstanding at 'A-'.

The Rating Outlook on all debt is Stable.

The 'A-' rating reflects the authority's solid operating profile and historically stable demand given its proximity to Philadelphia International Airport. The rating also reflects the authority's monopolistic position as the sole provider of on-site parking at the airport, and demonstrated history of rate-making flexibility.

Off-setting credit concerns include a multi-year downward trend in parking transactions, an ample supply of competitively priced off-site airport parking options which primarily competes with the airport for economy parking demand, substantial dependency on a relatively narrow stream of revenue, and low liquidity levels stemming from annual transfers of surplus cash flow to the City of Philadelphia. Annual transfers consistently range from $30 to $35 million, representing approximately 50% of the authority's gross operating revenues in recent fiscal years.

The authority's historical operating profile has been stable. Parking revenues grew from $43 million in 2003 to $70.5 million in 2008, at an average annual rate of 9%. The growth in operating revenues primarily reflects the authority's history of raising parking rates as well as its established although uneven demand for airport parking. PPA recorded approximately 2.5 million parking transactions in FY 2009. Following healthy transaction growth during fiscal years 2003-2006, parking transactions have fallen by roughly 15% over the past three years.
Recently both transactions and revenue performance have been affected by the economic downturn. Transactions fell to 2.5 million in FY 2009 from 2.8 million in FY 2008 (a year over year decrease of 11%), driven by reductions in enplanements at the airport as well as a decreasing correlation of passenger demand for onsite parking. Parking rate increases in 2008 (FY 2009) to both the economy lots and long-term garage have provided a partial revenue offset to the multi-year decline in transactions. PPA's ability to raise rates provides downside protection as transaction levels fluctuate; however, overall financial health may be pressured as demand continues to soften for short-term and medium-term parking. This situation is further exacerbated by ongoing competition for economy lots. Of the 10 private companies competing with PPA (essentially for economy parkers only), seven offer rates that are lower than the comparable PPA economy rate of $11 per day, including City tax.

Estimated annual debt service obligations on the authority's bonds are front loaded at approximately $17.5 million through fiscal 2019. In 2020 annual debt service decreases marginally to approximately $16 million and drops to approximately $14 million through fiscal 2024. Debt service steps down dramatically in fiscal 2025 to $7.5 million through the maturity of the debt (fiscal 2030). Based on projected net revenues, the authority expects debt service coverage to be near or above 2.9 times (x) in 2009 and remain above 2.5x through the life of the debt. Under various sensitivities, including material reductions in enplanements as well as reductions in travelers' demand for parking, debt service coverage remains strong near 2.0x through MADS.

The authority recently revisited its capital plan, adjusting and decreasing the level of future bonding expected in the near term, although overall sources and uses for the capital plan remain to be clarified. Funding sources now consist entirely of available cash on hand to fund the remaining $18 million in capital outlays. The authority's capital plan focuses on rehabilitation of existing infrastructure and the implementation of credit card enhancements and parking guidance systems, a new technology aimed at maximizing utilization of all the available spaces unoccupied in the parking structures. Longer-term projects focus on garage and economy parking lot expansion, although a timeline and funding sources have not been identified. As of FY 2008, the authority expended approximately $5.6 million on equipment acquisition, and expects to address structural repairs to its garages with recent $10 million in short-term borrowings.
In addition, in FY 2008 the authority demolished the airport's unutilized Overseas Terminal and converted the site into an economy parking lot, adding approximately 800 economy spots to the authority's inventory.

The application of the following criteria was used to derive the rating of the above referenced bonds and are available on the Fitch Ratings web site at ' www.fitchratings.com : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww .. '.

--'Rating Criteria for Infrastructure and Project Finance', dated Sept.
29, 2009.

Additional information is available at ' www.fitchratings.com : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww .. '.

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Fitch Ratings, New YorkVanessa E. Roy, +1-212-908-0508Emma
Walker, +1-212-908-9124Cindy Stoller, +1-212-908-0526 (Media
Relations) cindy.stoller@fitchratings.com : mailto:cindy.stoller@fitchratings.com