Fitch assigns an 'AA' rating to $551 million State of
Washington general obligation (GO) bonds, which will sell
competitively on January 24. Fitch also affirms the 'AA' rating of
$10.1 billion outstanding Washington GO bonds.
The offering consists of three series, for separate bids as follows:
-- $236,000,000 various purpose GO bonds, series 2006D;
-- $260,000,000 motor vehicle fuel tax GO bonds, series 2006E;
-- $55,000,146 motor vehicle fuel tax GO bonds, series 2006F.
Washington's 'AA' bond rating reflects the state's use of good debt and financial policies, as well as the breadth of the economy. Boeing Co., the state's largest private employer, is expanding significantly, and employment in software industries displays steady growth. These trends, coupled with robust growth in housing and construction have fueled the recovery of the Seattle area economy and the pronounced improvement in state revenues in 2004 and 2005. Revenue forecasts for the current biennium, which began June 30, have been steadily increased, substantially reducing projected funding gaps to be addressed during the 2007 biennial budget process. Financial forecasts reasonably expect more restrained growth but could fluctuate positively or negatively with changes in any of the major trends.
For the 2003-2005 biennium which ended June 30, revenue forecasts were revised upward on eight separate occasions between September 2003 and June 2005. General fund-state cash receipts grew an estimated 10.6% above the prior biennium. The general fund-state balance at June 30, 2005 was $853 million, or about 7.1% of annual cash receipts.
The 2005-2007 budget closed a then $1.4 billion funding gap through a combination of ongoing and one-time sources. Subsequent upward revisions to the revenue forecast, the most recent in November, result in a projected biennium ending balance of $1.4 billion. Projected general fund-state cash receipts for 2005-2007 total $26.3 billion, or 12.6% above those for the 2003-2005 biennium, and revenue performance through December is on track with estimates. Real estate excise tax and retail sales growth account for the bulk of recent increases; Washington does not levy a personal income tax. The governor has proposed a supplemental budget for the biennium that would apply a large percentage of the projected biennium ending balance (about 65%, or $905 million) to reserves.
Recent state economic performance has been robust. Between November 2004 and November 2005 employment grew by 2.7%, versus the 1.5% national growth rate. Growth in the Seattle area has been even stronger, helped by expansion at Boeing and the aerospace sector. The aerospace product and parts manufacturing sector gained 7,100 jobs (11.3% increase) in November 2005 compared with November 2004, although total employment of 69,700 in this sector remains more than 40,000 jobs below the 1998 peak. The real estate market in Washington has shown strength by nearly every measure, fueling rapid growth in construction (up 8.2% in November, year over year). Revised personal income per capita was 106% of the U.S. for 2004, ranking the state 12th.
Debt levels are moderate but above average. Tax-supported debt is $11.2 billion, $1,784 per capita (based on 2005 census estimates), and 5.2% of personal income. Motor vehicle fuel tax GO bonds are serviced from that revenue source, which covers debt service by about 4.2 times (x). The 2005 legislature passed a 9.5 cent increase to the 28 cent gas tax, phased in over four years starting July 1, 2005. An initiative to repeal the motor vehicle fuel tax increase was defeated in November 2005, allowing the state to proceed with a 16-year, $8.5 billion transportation improvement package.
The 2006D and 2006E bonds are expected to mature Jan. 1, 2007-2031 and are callable beginning Jan. 1, 2016. The series 2006F bonds are expected to mature Dec. 1, 2009-2029 and are not callable. The series 2006F bonds are the eighth to be issued under an $800 million authorization to provide financing, expected to be repaid from tolls, for a new parallel suspension structure alongside the existing Tacoma Narrows Bridge.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.
The offering consists of three series, for separate bids as follows:
-- $236,000,000 various purpose GO bonds, series 2006D;
-- $260,000,000 motor vehicle fuel tax GO bonds, series 2006E;
-- $55,000,146 motor vehicle fuel tax GO bonds, series 2006F.
Washington's 'AA' bond rating reflects the state's use of good debt and financial policies, as well as the breadth of the economy. Boeing Co., the state's largest private employer, is expanding significantly, and employment in software industries displays steady growth. These trends, coupled with robust growth in housing and construction have fueled the recovery of the Seattle area economy and the pronounced improvement in state revenues in 2004 and 2005. Revenue forecasts for the current biennium, which began June 30, have been steadily increased, substantially reducing projected funding gaps to be addressed during the 2007 biennial budget process. Financial forecasts reasonably expect more restrained growth but could fluctuate positively or negatively with changes in any of the major trends.
For the 2003-2005 biennium which ended June 30, revenue forecasts were revised upward on eight separate occasions between September 2003 and June 2005. General fund-state cash receipts grew an estimated 10.6% above the prior biennium. The general fund-state balance at June 30, 2005 was $853 million, or about 7.1% of annual cash receipts.
The 2005-2007 budget closed a then $1.4 billion funding gap through a combination of ongoing and one-time sources. Subsequent upward revisions to the revenue forecast, the most recent in November, result in a projected biennium ending balance of $1.4 billion. Projected general fund-state cash receipts for 2005-2007 total $26.3 billion, or 12.6% above those for the 2003-2005 biennium, and revenue performance through December is on track with estimates. Real estate excise tax and retail sales growth account for the bulk of recent increases; Washington does not levy a personal income tax. The governor has proposed a supplemental budget for the biennium that would apply a large percentage of the projected biennium ending balance (about 65%, or $905 million) to reserves.
Recent state economic performance has been robust. Between November 2004 and November 2005 employment grew by 2.7%, versus the 1.5% national growth rate. Growth in the Seattle area has been even stronger, helped by expansion at Boeing and the aerospace sector. The aerospace product and parts manufacturing sector gained 7,100 jobs (11.3% increase) in November 2005 compared with November 2004, although total employment of 69,700 in this sector remains more than 40,000 jobs below the 1998 peak. The real estate market in Washington has shown strength by nearly every measure, fueling rapid growth in construction (up 8.2% in November, year over year). Revised personal income per capita was 106% of the U.S. for 2004, ranking the state 12th.
Debt levels are moderate but above average. Tax-supported debt is $11.2 billion, $1,784 per capita (based on 2005 census estimates), and 5.2% of personal income. Motor vehicle fuel tax GO bonds are serviced from that revenue source, which covers debt service by about 4.2 times (x). The 2005 legislature passed a 9.5 cent increase to the 28 cent gas tax, phased in over four years starting July 1, 2005. An initiative to repeal the motor vehicle fuel tax increase was defeated in November 2005, allowing the state to proceed with a 16-year, $8.5 billion transportation improvement package.
The 2006D and 2006E bonds are expected to mature Jan. 1, 2007-2031 and are callable beginning Jan. 1, 2016. The series 2006F bonds are expected to mature Dec. 1, 2009-2029 and are not callable. The series 2006F bonds are the eighth to be issued under an $800 million authorization to provide financing, expected to be repaid from tolls, for a new parallel suspension structure alongside the existing Tacoma Narrows Bridge.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.