Garvee Debt Seen at Risk as U.S. Fiscal Cliff Looms, S&P Says
Grant Anticipation Revenue Vehicles, known as Garvees, are sold by states or transit agencies and backed by federal highway or transit aid. Moody’s Investors Service last month placed 28 Garvee ratings on review for downgrade. Fitch Ratings cut the level of 11 Garvees on Sept. 12.
“This sector continues to face economic and financial risks associated with the pace of the U.S. economic recovery, and with the consequences of federal deficits and budget impasses,” Peter Murphy, an analyst at S&P, said in the report.
Congress passed an act in June that extends an 18.4-cents- per-gallon federal gasoline tax, the main revenue source for the Highway Trust Fund, which finances Garvees.
The 27-month extension will provide $120 billion for highway and transit programs, according to S&P. Funds will also include about $19 billion from the general treasury. The legislation was the first long-term policy bill Congress has passed for highways and transit since 2009.
A so-called fiscal cliff of tax increases and spending cuts is set to take effect at the beginning of next year if Congress doesn’t break a partisan deadlock and reach agreement on the nation’s budget deficit.
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