Bond proceeds will be used to finance various transportation improvements and pay the costs of the bonds. The bonds will be sold via negotiation the week of
The Rating Outlook is Stable.
The sales tax revenue bonds are secured by revenue from the 1/2 cent retail transactions and use tax (sales tax) authorized by the voter approved TransNet extension ordinance and levied throughout
KEY RATING DRIVERS
STRONG DEBT SERVICE COVERAGE: Current debt service coverage levels are strong at 2.86 times (x) maximum annual debt service (MADS). Future debt plans are potentially significant but constrained by the commission's relatively high additional bonds test (ABT) of 2.0x MADS.
MODERATELY CONCENTRATED TAX BASE: Revenues recorded a new high in fiscal 2014, but have been somewhat volatile given the sharp 17.6% decline from 2007-2010. The tax base is moderately concentrated with the top 10 taxpayers generating nearly 14% of total revenues.
GROWING, DIVERSE ECONOMY:
LIMITED OPERATING RISK: The commission does not operate a public transportation system, which Fitch views positively as it reduces financial risks.
SUPPORT FOR ESSENTIAL PROJECTS: Fitch views positively the strong voter support for the TransNet program and the essentiality of TransNet's approved projects.
STRONG CREDIT FUNDAMENTALS: The rating is sensitive to shifts in fundamental credit characteristics including generally positive sales tax trends and consistently strong debt service coverage. The Stable Outlook reflects Fitch's expectation that such shifts are highly unlikely.
The commission allocates funding for public transit systems and oversees the construction and improvement of roads, highways, and other transit projects. The commission does not own or operate a public transit system. Given the entity's relatively narrow role, Fitch believes the commission has no material exposure to operating risks from related transit agencies.
STRONG DEBT SERVICE COVERAGE
The bonds benefit from strong projected debt service coverage levels. Coverage of MADS (excluding the federal subsidy on outstanding Build
Fitch views the commission's outstanding variable rate debt (approximately 27% of total debt post issuance) as elevated but manageable. Rating concerns are offset by the commission's resources dedicated to monitoring its debt portfolio, its good market access, and already high coverage levels that can withstand significant market stress. All of the variable rate debt is synthetically fixed through interest rate swaps with multiple counterparties. Current negative termination values are moderate, and any termination payments would be subordinate to debt service.
LEVERAGING CONSTRAINTS AND FUTURE DEBT PLANS
Strong coverage levels are somewhat protected by the commission's relatively high 2.0x ABT, calculated using revenues from the most recent audit.
Preliminary debt issuance plans through 2020 range as high as
SOLID REVENUE PERFORMANCE
Sales tax revenues are generated by a broad-based 1/2 cent sales tax on all taxable transactions within the county. Revenue performance is supported by a moderately concentrated group of sales tax generators. The largest taxpayer, Costco Wholesale, and the top 10 taxpayers comprise 3% and 13.9%, respectively, of total sales tax revenues.
Revenues recorded a new high in fiscal 2014 at approximately
Fitch notes that projected coverage levels are sufficient to withstand revenue declines well in excess of the recent drop. Fiscal 2014 revenues would need to decline by 65% to reach 1.0x MADS assuming no additional debt, offsetting concerns regarding the potentially volatile revenue stream.
GROWING, DIVERSE ECONOMY
The county's unemployment rate of 6.1% (
Major employers in the county reflect the diverse nature of the regional economy with defense, general government, higher education, health care, and technology all represented in the top 10. In addition, the county is home to a significant number of biotech and high-tech firms along with business interests connected with trade and
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' (
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
Source: Fitch Ratings
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