The bonds were originally rated in
Fitch also affirms the following outstanding motor fuel tax revenue bonds at 'BBB+':
The Rating Outlook is Negative.
The bonds are secured by a first lien on all motor fuel taxes distributed to the city by the state, subject to annual appropriation by the state legislature. Additionally, various project-related revenues are pledged.
KEY RATING DRIVERS
RATING CAPPED BY STATE RATING: The 'BBB+' rating on the fuel tax bonds is tied to the state's credit quality (Illinois GO bonds currently rated 'A-', Negative Outlook). Motor fuel tax revenues are distributed according to a formula controlled by state statute and are subject to annual appropriation by the state. Therefore, the rating on these bonds is capped at one notch below the state's GO rating.
SOLE RELIANCE ON FUEL TAX REVENUES: The rating assumes no support from the additionally pledged revenues, given the difficulty in assessing this relatively new revenue stream. The rating therefore relies solely on the motor fuel tax revenue stream.
ADEQUATE COVERAGE: Fitch base case projections indicate maximum annual debt service (MADS; 2038) coverage at or above 1.3x, assuming modest annual declines in motor fuel tax revenues.
NEGATIVE OUTLOOK TIED TO STATE'S RATING: The Negative Outlook results from Fitch's Negative Outlook on the state's GO bond rating.
STATE CREDIT QUALITY: The rating is sensitive to a downgrade in the state's GO rating, which would result in a downgrade of these bonds.
RATING TIED TO STATE RATING
The rating on the bonds is capped at one notch below the state's GO rating because motor fuel tax revenues are collected by the state and local distributions are subject to annual appropriation by the legislature. The state legislature also has the ability to alter the distribution formula or identify more priority allocations, as distribution of the motor fuel tax revenues only occurs after these priority allocations.
ADEQUATE DEBT SERVICE COVERAGE
Debt service coverage on the city's motor fuel tax bonds has historically been very strong and well in excess of the 2x additional bonds test (ABT). Pledged motor fuel tax revenues covered debt service by 3.1x in fiscal 2013.
The 2x ABT allows for inclusion of additional Riverwalk revenues (including dock fees, outdoor kiosk advertising, event sponsorship, naming rights, and concession and space rentals) to meet the test. Fitch believes the Riverwalk revenues do not add rating value and analyzes coverage of bond and loan debt service by motor fuel tax revenues alone.
Fitch's analysis assumes modest annual declines in available motor fuel tax revenues and shows a coverage trough of 1.3x at MADS in 2038. Fitch stress scenarios show the motor fuel tax revenue stream could withstand annual declines of 3.4% while still fully covering debt service.
For more information on the state see 'Fitch Rates $750MM Illinois GO Bonds 'A-'; Outlook Remains Negative' (
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope,
--'Tax-Supported Rating Criteria' (
--'U.S. Local Government Tax-Supported Rating Criteria' (
--'U.S. State Government Tax-Supported Rating Criteria' (
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
U.S. State Government Tax-Supported Rating Criteria
Source: Fitch Ratings
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