The bonds are expected to sell via competitive bid on
In addition, Fitch affirms the 'AA+' rating on
The Rating Outlook is Stable.
The bonds are secured by an irrevocable pledge of gross pledged revenues: statewide motor vehicle fuel taxes and federal reimbursements.
KEY RATING DRIVERS
STRONG LEGAL PROVISIONS: Pledged revenues are constitutionally dedicated for highway purposes and the gross lien provides strong security. The bonds are further protected by an additional bonds test of 2x maximum annual debt service (MADS), excluding federal reimbursements.
SOLID DEBT SERVICE COVERAGE: Debt service coverage remains sound at 4.3x from pledged motor fuel taxes despite revenue decline over the past several years. Although revenues stabilized in 2013, improvement in debt service coverage reflects in large part the declining debt service schedule.
REVENUE VOLATILITY MITIGATED: The volatility inherent in a tax based on consumption is mitigated by the strong debt service coverage on the bonds and
The rating is sensitive to shifts in the stream of pledged revenue that would affect debt service coverage on the bonds.
Strong security is provided by the gross lien on pledged revenues, which are constitutionally dedicated for highway purposes. Pledged revenues include motor fuel taxes (about two-thirds from the gas tax and one-third from special fuels, with diesel the largest component of the latter) and federal reimbursements on eligible projects. The bonds are further protected by the sound additional bonds test requiring 2x coverage of MADS, excluding federal reimbursements. Coverage of debt service from motor fuel taxes is ample.
As with any tax based on consumption, there is exposure to reduced use due to price increases, use restrictions, or, as has been the case since the recession, economic weakness. However, these risks are mitigated by the relatively broad nature of the statewide motor fuel tax, demonstrated sound debt service coverage, and the state's pledge not to impair revenues. Specific pledged motor fuel taxes to repay the bonds are the state's
Motor fuel tax receipts amounted to
FY 2013 motor fuel revenue provides 3.9x coverage of MADS (in 2016), including the current issue. As debt service declines to
The state's population growth has led to increased infrastructure needs. The state
The state continues work on maximizing current revenues in addition to considering alternative approaches, such as public-private partnerships, for funding the state's transportation needs. The 2007 legislature provided for new sources of funding by redirecting a portion of a currently imposed property tax in counties with populations of 100,000 or more (effectively
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. State Government Tax-Supported Rating Criteria
Source: Fitch Ratings
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