Fitch Ratings assigns an 'AA' rating to the following lease revenue bonds of the Maryland Stadium Authority (MSA):
--$14.05 million Hippodrome Performing Arts Center taxable lease revenue refunding bonds, series 2012.
The bonds will sell via negotiated sale on or about July 25, 2012.
In addition, Fitch affirms the following ratings:
--Approx. $228.8 million MSA lease revenue bonds at 'AA'.
The Rating Outlook is Stable.
The bonds are lease obligations of the State of Maryland, subject to annual appropriation.
KEY RATING DRIVERS
CREDIT LINKED TO STATE: The bonds are lease obligations of the State of Maryland, subject to annual legislative appropriations, thus linking the credit quality of the bonds to the State of Maryland. The MSA's leasehold interest in funded projects is also pledged.
STRONG DEBT MANAGEMENT: Debt oversight is strong and centralized, and the debt burden is moderate. The state has policies to maintain debt affordability, and the constitution requires GO and transportation bonds to amortize within 15 years.
PENSION FUNDING REFORMS: Pension funding levels have deteriorated, although the state has undertaken extensive pension and other post-employment benefit (OPEB) reforms.
BROAD ECONOMY: The state has a diverse, wealthy economy, benefiting from its proximity to the nation's capital.
CONSERVATIVE FINANCIAL OPERATIONS: Financial operations are conservative, and the state maintains a well-funded rainy day fund to manage revenue cyclicality. The state took repeated action during the course of the recession to address projected budget gaps, including raising tax revenues, cutting spending, and using rainy day and other balances.
Lease revenue bonds of the MSA are secured by leases between the MSA and the State of Maryland, with lease payments subject to annual legislative appropriation. The 'AA' long-term rating of the bonds is thus linked to the credit quality of the State of Maryland, whose general obligation (GO) bonds are rated 'AAA', Rating Outlook Stable, by Fitch. The MSA has funded multiple sports, cultural and convention venues statewide using a master lease structure, and MSA borrowing is closely managed by the state itself. Proceeds of the current sale will refund outstanding bonds issued in 2002 for the Hippodrome Theatre, a performance venue in Baltimore.
The 'AAA' rating on Maryland's GO bonds reflects its sound financial operations, a wealthy, diversified economy and strong management of debt. The state is wealthy and its economy benefits from proximity to the nation's capital. Economic and revenue recovery has been slow since the end of the last recession, although the state has benefited recently from job gains associated with federal realignment. The state's approach to fiscal management has been consistently conservative both through the last recession and during the recovery, with the state relying on spending cuts, revenue increases and the use of non-recurring resources to maintain balance. Maryland retains a well-funded rainy day fund (RDF) and ample fiscal flexibility. Federal spending cuts could weigh on the state in the near term, although Fitch believes the state would have time to react to the impact of federal changes.
For further information on the State of Maryland, see Fitch's rating action commentary of July 18, 2012, 'Fitch Rates $728MM State of Maryland GOs 'AAA' Outlook Stable', available at www.fitchratings.com.
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.
In addition to the sources of information identified in the Tax-Supported Rating Criteria, this action was additionally informed by information from IHS Global Insight.
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
U.S. State Government Tax-Supported Rating Criteria
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