The San Francisco Port Commission was recently removed from CreditWatch with negative implications after Standard & Poor's Corp. downgraded the port's $531 million of revenue bonds to BBB-plus from A-minus.
Standard & Poor's said the rating was cut because of "reduced autonomy and increased competitiveness." The rating agency said Senate Bill 844, which was signed into law last year and permits money to be transferred from ports to cities over a two-year period, was also a factor in the rating change.
The port's outlook is now stable, following the downgrade.
The port is one of four in California that received rating reviews from Standard & Poor's in recent weeks. The reviews were in connection with passage of legislation that allows the host cities to request unrestricted port moneys to replace property taxes transferred by the state for education purposes.
The Port of Long Beach was downgraded to AA-minus from AA; the Port of Los Angeles was put on CreditWatch with developing implications after announcing plans to defease its AA-rated revenue bonds; and the Port of Oakland was removed from CreditWatch when its AA-minus rating was affirmed.
The Port of San Francisco never transferred any port moneys to the city or county of San Francisco after a city attorney ruled that such transfers were illegal. But Standard & Poor's said the port "as a smaller, less diversified port operator ... would be more vulnerable should future transfers occur."
"S&P has a broader concern about the autonomy of California ports over the long term, and our bonds are long term," said Ben Kutnick, port finance manager. "Even though we are protected from the current legislation [S.B. 844], we got caught up in S&P's overall concern."
Kutnick said the port plans to refinance its existing debt next April to take advantage of hoped-for lower interest rates and to create a new bond indenture "that we think will protect us further" from possible transfers.
The finance official added that the port will meet with Standard & Poor's after the refunding to try to restore its higher rating.