Moody’s Investors Service said Wednesday it raised the New Jersey Turnpike Authority’s senior lien revenue bonds to A1 from A2. The outlook on the bonds is stable.

At the same time, Moody’s assigned an A1 to the authority’s forward delivery refunding bonds, consisting of $100 million of Series 2022A turnpike revenue bonds and $849 million of Series 2024A turnpike revenue bonds.

Moody’s said the upgrade “reflects the credit positive impact of the implementation of the NJTA’s new annual toll indexation policy, the better-than-expected traffic and revenue rebound from the pandemic driven declines, increased clarity on the pace of new debt to be issued to fund new capital investments, and a signed new multi-year subordinate transfer agreement with the state owner.”

The authority is a unit of the state and transfers funds annually to the state. The governor approves the authority’s budget and toll rates, which limits the authority’s autonomy and independence, Moody’s said.

The rating agency said the upgrade therefore also reflects the improvement in the credit profile of the state, whose general obligations are rated A3 with a positive outlook.

Moody’s revised the state’s credit outlook to positive from stable in July 2021 after revising the outlook to stable from negative in April 2021 due to the state’s better than anticipated financial position and improved governance profile.

“Owing to this relationship, we currently constrain NJTA’s rating to two notches above the state’s general obligation rating,” Moody’s said.

Moody’s said the A1 rating reflects the Turnpike Authority’s strong market position “as an essential part of the Northeast’s primary road network in a wealthier region of the country with an established history of continued demand for the authority’s toll roads through large rate increases, economic recessions, and other negative shocks like the recent pandemic.”

The rating agency said that while the COVID-19 pandemic caused an initial impact that resulted in a 22.5% traffic decline in 2020 from the prior year, traffic steadily recovered throughout 2021. As a result, Moody’s said monthly traffic levels in 2021 steadily improved to 4.5% below 2019 levels by the end of November.

“The stable outlook reflects our expectation that NJTA will continue to effectively manage its scalable capital improvement plan by continuing to follow its annual toll indexation policy in order to ensure financial metrics remain sound,” Moody’s said. “The outlook also reflects our expectation that the state’s credit quality will not deteriorate below current levels, as indicated by its current positive outlook, and NJTA’s relationship with the state will remain sound and supportive of its new toll policy given the state receives a large share of excess cashflow through its subordinated multi-year transfer agreement.”

In January 2021, the turnpike came to market with $502 million of turnpike revenue bonds.