The Rating Outlook is Stable.
The 'AA-' rating reflects the essential nature of the system along with stable traffic and revenue performance. Although the turnpike has a large work program which includes the need for new money, consistently strong coverage is expected to persist with the addition of debt.
KEY RATING DRIVERS
Revenue Risk - Volume: Stronger
STRONG RATE-MAKING FLEXIBILITY: Considerable economic flexibility exists to increase toll rates. Toll rates were increased effective
Revenue Risk - Price: Stronger
MANAGEABLE WORK PROGRAM: The turnpike's FY 2015-2019 proposed work program totals
CONSERVATIVE DEBT PORTFOLIO: The turnpike's debt portfolio consists of fully amortizing, fixed-rate debt with a flat to declining profile and a cash-funded debt service reserve.
Debt Structure: Stronger
MODERATE LEVERAGE and SOLID FINANCIAL MARGINS: Leverage is comparable to peers, currently being under 5x. DSCR increased to 2.50x in FY 2013 due to the indexed cash toll increase and associated increase to electronic toll rates. Fitch expects DSCR to remain above 2.0x for the foreseeable future, having declined to 1.88x and 1.93x in FY 2011 and FY 2012, respectively.
Declining Coverage: Erosion of DSCR below 2x for a sustained period due to lower-than-anticipated revenues derived from toll increases would put pressure on the rating.
Additional Leverage: Increases in leverage beyond historical levels could lead to negative rating action.
Cost Growth: Inability to actively control operating expenses along with costs related to its work program would reflect a weakened credit profile.
Turnpike revenue bonds are secured by a first lien on the gross revenues of the turnpike.
Proceeds from the series 2014A revenue bonds will be used to refinance approximately
Toll revenues increased 24.1% in FY 2013, despite toll transactions declining 0.2%, reflecting modest toll elasticity from the five-year cash toll and one-year electronic toll CPI resets implemented at the start of the year. Toll transactions in the first nine months of FY 2014 were 3.4% up on the same period in FY 2013, supporting a 4.0% increase in toll revenue over the same period, implying negligible sensitivity to the annual indexation of electronic tolls implemented on
Remaining work in FTE's five-year 2015-2019 capital works program is estimated at
Approximately 30% of that total works plan is slated for widening projects, while capital projects account for
FTE has, in recent years, maintained firm control on expenses, which fell by 3.5% in FY 2012 and a further 9.4% in FY 2013. These achievements were primarily due to the implementation of automatic ticket-issuing machines, reduced postage and mailing costs, fewer citations issued, and other operational efficiencies. For FY 2014, operating expenses are projected to grow by 9.7% due to a combination of increased headcount related to
Fitch's base case forecast assumes a slower growth rate in toll transactions as compared to the sponsor case and also assumes indexation of toll rate increases and future planned debt issuances relating to the current work program. Operating expense growth is assumed to be above the sponsor forecast but consistent with historical levels. Under this scenario, Fitch expects DSCR to remain above 2.0x in the medium term. Fitch's rating case assumes more conservative assumptions with regard to traffic and revenue growth and slightly higher expense growth. DSCR under the rating case could fall to a low of 1.9x with growth resuming thereafter. To the extent that revenues and operating expenses produce coverage levels below 2x for a sustained period, above-inflationary toll increases would be necessary to maintain financial flexibility consistent with the rating level.
The turnpike system operates as an enterprise within FDOT. Its facilities include the mainline, segments of which have been operational since the 1950s, the
Additional information is available at 'www.fitchratings.com'.
--'Rating Criteria for Infrastructure and Project Finance' (
--'Rating Criteria for Toll Roads, Bridges, and Tunnels' (
Rating Criteria for Infrastructure and Project Finance
Rating Criteria for Toll Roads, Bridges and Tunnels
Source: Fitch Ratings
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