Fitch Rates Wisconsin's $375MM Transportation Revs 'AA+'
March 15 2012 - 5:54PM
Business Wire
Fitch Ratings assigns an 'AA+' rating to the following State of
Wisconsin (the state) transportation revenue bonds:
--$374.73 million transportation revenue bonds, 2012 series
1.
The bonds are expected to sell via negotiated sale as early as
the week of March 19. In addition, Fitch affirms the following
ratings:
--$1.768 billion in outstanding state transportation revenue
bonds at 'AA+'.
The Rating Outlook is Stable.
SECURITY
The bonds are revenue obligations of the state secured by a
first lien pledge on vehicle registration and certain related fees
levied by the state.
KEY RATING DRIVERS
--STABLE REVENUE SOURCE: The principal revenue source, vehicle
registration fees, is narrow though stable, and the state has
periodically raised revenues to augment coverage.
--SATISFACTORY COVERAGE: The additional bonds test requires that
pledged revenues cover debt service by 2.25 times (x), a
satisfactory level. Coverage of maximum annual debt service (MADS)
is ample.
--MODEST FORECAST GROWTH: Forecast annual growth in pledged
revenues is modest and well under historical averages, although
future transportation borrowing could narrow coverage.
WHAT COULD TRIGGER A RATING ACTION
--Changes to the state's practice of limiting leverage of the
revenue stream.
CREDIT SUMMARY
The 'AA+' rating reflects ample coverage and security from a
first claim on statutorily pledged program income (derived largely
from motor vehicle registration fees) along with the satisfactory
additional bonds test of 2.25 times (x) and long track record of
raising and expanding revenues as necessary. Pledged revenues are
essentially a narrow single source, not constitutionally dedicated,
and the larger transportation fund revenues are not pledged. The
current sale consists of new money and refunding proceeds, with the
new money proceeds used to fund state transportation facilities and
highway projects.
The bonds are secured by a first claim on pledged program
income, primarily vehicle registration fees equal to 86% of total
program income as of fiscal 2011, and other registration-related
fees pledged since 2003, including titling and personalized license
plate charges. To provide additional revenues, fees have been
periodically increased with the last increase effective Jan. 1,
2008.
The additional bonds test requires 2.25x coverage by historical
revenues, with the state by policy targeting a minimum of 2.5x
coverage. Total pledged revenues in fiscal year 2011 equaled $591.4
million, which provided 2.74x coverage of MADS including the new
bonds, and including $130 million authorized bonds to refund
outstanding transportation revenue commercial paper (CP) notes,
whose pledge is subordinate to the bonds. Estimated fiscal 2012
registration fees alone provide satisfactory coverage of MADS equal
to 2.42x in fiscal 2012, with all pledged revenues providing 2.85x
coverage. During the forecast period from fiscal 2012 to 2021,
annual coverage by all pledged revenues ranges from 2.82x in fiscal
2013, the year of MADS, to 3.76x in fiscal 2020.
Vehicle registration fees historically have been a stable source
of revenues, although they are affected by economic conditions. The
state has a history of raising fees to support the program and
augment coverage; effective Jan. 1 2008, it increased the
automobile registration fee $20, to $75, and the title transaction
fee $24.50, to $69.50. Registration fee revenues consequently rose
18.8% and 11.7% in fiscal 2008 and 2009, respectively, even as
recessionary conditions slowed the growth of registrations to 1%
and 1.2% during those years. Growth in registration fee revenues
has been uneven since then, reflecting in part the slow nature of
the economic recovery. Registration revenues rose 1.7% in fiscal
2010 and declined 1.9% in fiscal 2011; the state currently
forecasts that registration revenues will rise 2.2% in fiscal 2012.
Average annual growth in registration revenues through the fiscal
2021 forecast period is just under 0.5% annually.
Additional information is available at 'www.fitchratings.com'.
The ratings above were solicited by, or on behalf of, the issuer,
and therefore, Fitch has been compensated for the provision of the
ratings.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 15, 2011).
--'U.S. State Government Tax-Supported Rating Criteria' (Aug.
15, 2011).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648898
U.S. State Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648897
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