The bonds are expected to be sold through negotiation on
In addition, Fitch affirms the 'AA-' rating on the state's outstanding parity series 2013A bonds.
The Rating Outlook is Stable.
The bonds are special and limited obligations of the state payable from and secured by pledged truck and trailer registration taxes and fees.
KEY RATING DRIVERS
ESTABLISHED BUT VOLATILE REVENUE STREAM: The state's collection of truck and trailer registration taxes and fees is well-established, with distribution to the state highway infrastructure fund in place since 2007. Pledged revenues are susceptible to both state and national economic conditions and historically have been affected by significant weather-related events as well as the Horizon oil spill.
STRONG FLOW OF FUNDS: A strength in the flow of funds is the priority of pledged revenue for debt service on these bonds prior to transfer to the state's bond security and redemption fund. Also providing credit support is the requirement that a full year's debt service be funded from first dollars received prior to any other uses.
SOUND COVERAGE: The bonds benefit from sound coverage of debt service by pledged revenues, with a 2x maximum annual debt service (MADS) test (ABT) for additional bonds. The state reports that the current issue will complete its plans to issue debt under this security.
COMMODITY-BASED ECONOMY: The state's commodity-based economy, heavily linked to oil and gas production, has modestly diversified although one-third of the state's gross state product continues to derive from the production and delivery of raw materials and intermediate goods.
The rating is sensitive to shifts in the level of pledged revenues that would affect debt service coverage on the bonds.
The 'AA-' rating on the bonds reflects the gross pledge of the designated revenue sources prior to excess revenues being made available to the state's bond security and redemption fund (BSRF). Pledged revenues have shown a fair amount of variability over time, with impacts from both economic and catastrophic weather conditions. Debt service is fully funded by first dollars received in the Act 135 Fund, providing for expected full funding of debt service requirements on the combined series 2013A and 2014A bonds about eight to nine months into the fiscal year based on historical trends. Total debt issuance under this security, including the current issue, will total
The current offering is the final expected under this security and the state has structured this issue such that historical revenues will provide at least 2x coverage of approximately
Pledged revenues are captured in two separate accounts in the Act 135 Fund: an intrastate SHIF account and an interstate SHIF account. Deposits are made on a daily basis to the intrastate SHIF account from the collection of registration taxes and fees on trucks and trailers that operate solely within the state. The interstate SHIF account receives pledged revenue on a monthly basis from trucks and trailers engaged in interstate trucking (operating in multiple states) through a collection agreement with the International Registration Plan (IRP) that is managed through a well-established process by an independent collection agency.
Historically, significant annual fluctuations in either or both interstate (34% of fiscal 2013 pledged revenues) and intrastate (66%) pledged revenues have resulted from a number of factors. Among them are: the state's recovery from multiple hurricanes; the economic recession; the Horizon oil spill; as well as a rate change in fiscal 2012 for Class I truck registrations that boosted intrastate revenue collections by 66% and total collections by 40%.
The largest year-over-year decrease in total revenues since 2000 was a 14.7% decline in fiscal 2011, when a 34% decline in intrastate revenue was offset by a 46% increase in interstate revenue. Revenues declined by 13.7% in fiscal 2013 due to a change in requiring four-year registrations for Class I trucks weighing less than 10,000 pounds from the prior annually required registration that boosted receipts in fiscal 2012. A fiscal 2013 decline was expected when the bonding program was initially rated last year and the actual rate of decline was less than anticipated. Combined pledged revenue in fiscal 2013 of
Overall, a five-year average of combined pledged revenues through fiscal 2013 of an essentially flat
Additional information is available at 'www.fitchratings.com'.
--'Tax-Supported Rating Criteria' (
--'U.S. State Government Tax-Supported Rating Criteria' (
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
Source: Fitch Ratings
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