Fitch Rates Wisconsin's $207MM Transportation Revs 'AA+'

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns an 'AA+' rating to the following transportation revenue bonds for the state of Wisconsin:

--$207.525 million transportation revenue bonds, 2015 series 1.

The bonds are expected to sell via negotiated sale as early as March 26, 2015.

In addition, Fitch affirms the following ratings:

--$1.89 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 over time, and the state has periodically raised revenues to augment coverage.

SATISFACTORY COVERAGE: The additional bonds test (ABT)requires that pledged revenues cover debt service by 2.25x, a satisfactory level. Coverage of maximum annual debt service (MADS) is ample.

RATING SENSITIVITIES

The rating is sensitive to changes to the state's practice of limiting leverage of the pledged 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 ABT of 2.25x and long track record of raising and expanding revenues as necessary. Pledged revenues are essentially a narrow single source and the larger transportation fund revenues are not pledged. The bonds being issued will refund outstanding bonds for debt service savings.

SOLID COVERAGE FROM PLEDGED REVENUES

Vehicle registration fees equal 84% of total program income as of fiscal 2014; 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 ABT requires 2.25x coverage by historical revenues, with the state targeting a minimum of 2.5x coverage by policy. Total pledged revenues in fiscal 2013 were slightly above estimate at $644.7 million, which provides 2.8x coverage of MADS (in fiscal 2015), including the current sale. Calculations of future debt service assume that previously authorized bonds are issued to refund outstanding transportation revenue commercial paper (CP) notes, whose pledge is subordinate to the bonds. Fiscal 2014 registration fees alone provide satisfactory coverage of MADS equal to 2.4x. During the forecast period from fiscal 2015 to 2022, annual coverage by all pledged revenues ranges from 2.8x in fiscal 2015, the year of MADS, to 3.8x in fiscal 2022.

While vehicle registration fees have provided ample coverage of debt service requirements, they are subject to changes in 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 fluctuated 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. They declined a modest 0.62% in fiscal 2013, better than forecast before rebounding a solid 4.1% in fiscal 2014, well above the 2.2% forecast growth. The current state forecast is for 0.2% growth in fiscal 2015. Average annual growth in registration revenues through the fiscal 2022 forecast period is approximately 1.9% annually.

FUTURE CAPITAL NEEDS

The governor has proposed, in his fiscal 2016-17 budget, an expansion in leveraging for transportation purposes. The proposal would pledge 50% of motor vehicle fuel tax revenues to up to $1.011 billion in new bonds. If enacted, the additional pledge would not affect bonds outstanding under the current transportation revenue program.

Additional information is available at 'www.fitchratings.com'

Applicable Criteria and Related Research:

'Tax-Supported Rating Criteria' (Aug. 14, 2012);

'U.S. State Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. State Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686033

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=981920

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Fitch Ratings
Karen Krop
Senior Director
+1-212-908-0661
Fitch Ratings, Inc.
Primary Analyst
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Douglas Offerman
Senior Director
+1-212-908-0889
or
Committee Chairperson
Laura Porter
Managing Director
+1-212-908-0575
or
Media Relations
Elizabeth Fogerty
+1-212-908-0526
New York
[email protected]

Source: Fitch Ratings

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