Fitch Rates Wisconsin's $225MM Transportation Revs 'AA+'

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

--$225 million transportation revenue bonds, 2015 series A.

The bonds are expected to sell via competitive sale as early as Nov. 17, 2015.

In addition, Fitch affirms the following ratings:

--$1.765 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 fund major highway projects and transportation facilities.

SOLID COVERAGE FROM PLEDGED REVENUES

Vehicle registration fees equal 84% of total program income as of fiscal 2015; 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 2015 were slightly above estimate at $652.2 million, which provides 2.8x coverage of MADS (in fiscal 2017), 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 2015 registration fees alone provide satisfactory coverage of MADS equal to 2.4x. During the forecast period from fiscal 2016 to 2023, annual coverage by all pledged revenues ranges from 2.85x in fiscal 2016 to 3.8x in fiscal 2023.

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 fiscals 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. Registration revenues increased 0.6% in fiscal 2015, slightly above the 0.2% forecast growth rate. Average annual growth in registration revenues through the fiscal 2023 forecast period is approximately 1.5% annually.

FUTURE CAPITAL NEEDS

The fiscal 2016-17 biennial budget included authorization for $163 million in additional transportation revenue bonds and $687 million in general obligation (GO) bonds for transportation purposes. Of the authorized GO bonds, $350 million was contingent upon the administration requesting and the Legislative Joint Commission on Finance approving the additional bonding, both of which have since occurred.

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

Fitch recently published an exposure draft of state and local government tax-supported criteria (Exposure Draft: U.S. Tax-Supported Rating Criteria, dated Sept. 10, 2015). The draft includes a number of proposed revisions to existing criteria. If applied in the proposed form, Fitch estimates the revised criteria would result in changes to fewer than 10% of existing tax-supported ratings. Fitch expects that final criteria will be approved and published by Jan. 20, 2016. Once approved, the criteria will be applied immediately to any new issue and surveillance rating review. Fitch anticipates the criteria to be applied to all ratings that fall under the criteria within a 12-month period from the final approval date.

Applicable Criteria

Exposure Draft: U.S. Tax-Supported Rating Criteria (pub. 10 Sep 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869942

Tax-Supported Rating Criteria (pub. 14 Aug 2012)

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

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

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

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=994045

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=994045

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151113005913/en/

Fitch Ratings
Primary Analyst
Karen Krop
Senior Director
+1-212-908-0661
Fitch Ratings, Inc
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Douglas Offerman
Senior Director
+1-212-908-0889
or
Committee Chairperson
Marcy Block
Senior Director
+1-212-908-0239
or
Media Relations
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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