Fitch Ratings assigns an 'A+' rating to the New Jersey
Transportation Trust Fund Authority's (TTFA) approximately $2.8
billion transportation system bonds, 2006 series, consisting of $1.6
billion transportation system bonds, series A; $109.4 million
transportation system bonds, series B (federally taxable); and $1.1
billion transportation system bonds, series C. The bonds are scheduled
to sell the week of May 23 through negotiation by syndicate led by
Bear, Stearns & Co. Inc. The 'A+' rating assigned to the 2006 series C
bonds is an underlying rating as municipal bond insurance is expected.
In addition, the 'A+' rating assigned to $7.4 billion outstanding
parity bonds is affirmed by Fitch.
The 'A+' rating on the bonds is based solely on annual contract payments, subject to legislative appropriation, to be made by the State of New Jersey (the state). Authority debt service is paid under a state contract with the treasurer of the State of New Jersey, from payments to be made to the authority from the transportation trust fund account within the state's general fund. The payments are pledged first to debt service. The contract, pursuant to statute, specifies minimum equivalent amounts from several transportation-related taxes and fees, the vast majority of which are now constitutionally dedicated to transportation and may not be used or borrowed for any other purposes. The taxes and fees themselves are not pledged as security, only their deposit to the account. Should a shortfall occur, the contract requires the shortfall to be made up from other general fund revenues. Even after three prior debt restructurings and before March 2006 changes, TTFA debt service consumed all of the dedicated revenues. Recent changes to the program allow TTFA debt to have 31-year maturities. Along with a fourth restructuring of existing debt, the use of delayed principal amortization and capital appreciation bonds, and $90 million in additional dedicated revenues, these changes provide for a $6.4 billion five-year capital program for new projects - a near doubling of debt by that time. However, this leveraging will result in all of the now $895 million dedicated revenues being consumed by debt service obligations by 2012 assuming issuance of the full five year program, leaving no resources for additional capital programs thereafter until new revenues are identified.
The state's 'AA-' rating and the Stable Rating Outlook heavily consider an executive budget proposal for fiscal 2007 that seeks to reverse nearly a half decade of structurally imbalanced financial operations propped up by unsustainable actions. While the state's economic resources are vast, such adverse practices, along with rising, now high, debt levels and ongoing pressures for relief from high local property taxes, could otherwise result in a downward credit direction. The rating reflects the strength of the underlying economy offset by significant challenges, including large capital funding needs and persistent structural budget gaps. After the this sale net tax-supported debt outstanding rises to $30.6 billion equal to $3,517 per capita and a high 8% of 2005 personal income, more than double the burden of 10 years ago. When $2.7 billion in pension bonds are excluded from the calculation, the ratio still remains a high 7.2%.
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 'A+' rating on the bonds is based solely on annual contract payments, subject to legislative appropriation, to be made by the State of New Jersey (the state). Authority debt service is paid under a state contract with the treasurer of the State of New Jersey, from payments to be made to the authority from the transportation trust fund account within the state's general fund. The payments are pledged first to debt service. The contract, pursuant to statute, specifies minimum equivalent amounts from several transportation-related taxes and fees, the vast majority of which are now constitutionally dedicated to transportation and may not be used or borrowed for any other purposes. The taxes and fees themselves are not pledged as security, only their deposit to the account. Should a shortfall occur, the contract requires the shortfall to be made up from other general fund revenues. Even after three prior debt restructurings and before March 2006 changes, TTFA debt service consumed all of the dedicated revenues. Recent changes to the program allow TTFA debt to have 31-year maturities. Along with a fourth restructuring of existing debt, the use of delayed principal amortization and capital appreciation bonds, and $90 million in additional dedicated revenues, these changes provide for a $6.4 billion five-year capital program for new projects - a near doubling of debt by that time. However, this leveraging will result in all of the now $895 million dedicated revenues being consumed by debt service obligations by 2012 assuming issuance of the full five year program, leaving no resources for additional capital programs thereafter until new revenues are identified.
The state's 'AA-' rating and the Stable Rating Outlook heavily consider an executive budget proposal for fiscal 2007 that seeks to reverse nearly a half decade of structurally imbalanced financial operations propped up by unsustainable actions. While the state's economic resources are vast, such adverse practices, along with rising, now high, debt levels and ongoing pressures for relief from high local property taxes, could otherwise result in a downward credit direction. The rating reflects the strength of the underlying economy offset by significant challenges, including large capital funding needs and persistent structural budget gaps. After the this sale net tax-supported debt outstanding rises to $30.6 billion equal to $3,517 per capita and a high 8% of 2005 personal income, more than double the burden of 10 years ago. When $2.7 billion in pension bonds are excluded from the calculation, the ratio still remains a high 7.2%.
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.