Fitch Ratings assigns an 'AA' rating to $185 million State of Wisconsin transportation revenue bonds 2008 series A expected by negotiation the week of Aug. 5. The bonds are due July 1, 2010-2029. Proceeds of 2008 series A bonds fund transportation projects. Fitch also affirms the 'AA' rating on $1.3 billion outstanding Wisconsin transportation revenue bonds. The Rating Outlook is Stable.
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. Credit quality, while higher than the state general obligation bonds, rated 'AA-' by Fitch, is constrained as pledged revenues are a narrow single source, not constitutionally dedicated and the larger transportation fund revenues are not pledged.
The bonds are secured by a first claim on pledged program income, primarily vehicle registration fees, equal to 84% of total revenues and other registration related fees additionally pledged in 2003 from titling fees, registration and title service fees, 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, and the state targets at least 2.5x coverage. Total pledged revenues in fiscal year 2007 equaled $449.6 million, a rise of 1.7 % from the prior year. Fiscal 2007 pledged revenues provide 2.5x coverage of maximum annual debt service (MADS) after these issues and including bonds that could be issued to fund $178 million outstanding transportation revenue commercial paper notes. Registration fees alone provides satisfactory coverage of MADS equal to 2.2x in fiscal 2007. Annual coverage in fiscal 2007 was 3.2x. During the forecast period from fiscal 2008 to 2017, annual coverage ranges from 3.0x in fiscal 2008 to 5.1x in fiscal 2017 including debt service on bonds that may be issued to fund commercial paper notes. Coverage of MADS ranges from 2.9x in fiscal 2008 to 4.2x in fiscal 2017.
Vehicle registration fees tend to be a stable source of highway-related revenues and have increased in Wisconsin in all but two years since 1999, including fees generated by rate increases. Collections declined in fiscal 2003 by 1.1%, although the number of vehicle registrations increased 2.8% in the year. In fiscal 2007, fee revenues declined 2.9% but actual registrations rose 2.5% to reach 5.5 million. Projected 2008 registrations rise 1.1% and with the fee increase, revenues are projected to climb 18.4% to reach $456 million. The state projects that registration fees will grow at a slightly slower pace through fiscal 2017 than in the prior 10 year period. Estimates for growth in the other pledged revenues are modest. The state has a history of raising fees to support the program with the automobile registration fee raised $20 to equal $75 effective Jan. 1, 2008 and the title transaction fee rose another $24.50 to $69.50.
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Contacts:
Janet H. Martin, 212-908-0507
Richard
J. Raphael, 212-908-0506
Sandro Scenga, 212-908-0278 (Media
Relations)
