TEXT - Fitch rates Wisconsin's transportation revs 'AA+'
Jan 30 - Fitch Ratings assigns an 'AA+' rating to the following transportation revenue bonds for the State of Wisconsin: --$245.75 million transportation revenue bonds, 2013 series 1. The bonds are expected to sell via negotiated sale as early as Jan. 31, 2013. In addition, Fitch affirms the following ratings: --$1.694 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. SENSITIVITIES/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 PROFILE 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 2.25x and a 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 bonds are being issued for both new project needs and advanced refunding purposes. Vehicle registration fees equal 84.7% of total program income as of fiscal 2012; other registration-related fees pledged since 2003 include 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 2013 are estimated at $609.9 million, which provides 2.79x coverage of MADS (in fiscal 2014), including the current sale. Calculations of future debt service assume that $112 million in authorized bonds are issued to refund outstanding transportation revenue commercial paper (CP) notes, whose pledge is subordinate to the bonds. Estimated fiscal 2013 registration fees alone provide satisfactory coverage of MADS equal to 2.41x. During the forecast period from fiscal 2013 to 2021, annual coverage by all pledged revenues ranges from 2.87x in fiscal 2014, the year of MADS, to 3.79x in fiscal 2021. 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. For instance, it increased the automobile registration fee $20, to $75, and the title transaction fee $24.50, to $69.50 on Jan. 1, 2008. 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 1.1% and 1.2% during those years. Registration fee revenues have been generally flat since then, reflecting in part the slow nature of the economic recovery and the state's biennial renewal process. Registration revenues declined 1.9% in fiscal 2011 but rose 3.2% in fiscal 2012. The state currently forecasts that registration revenues will decline 2% in fiscal 2013. Average annual growth in registration revenues through the fiscal 2021 forecast period is approximately 0.7% annually.
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