Fitch Ratings assigns a rating of 'AA+' to the
$750,000,000 Texas Transportation Commission, State of Texas, general
obligation (GO) mobility fund bonds, series 2006, expected to sell
through negotiation on June 1 through a syndicate led by Bear, Stearns
& Co, Inc. Fitch Ratings also affirms the 'AA+' rating on outstanding
general obligation bonds of the State of Texas. The Ratings Outlook is
Stable.
The 'AA+' rating on Texas GO bonds reflects the state's low debt, conservative financial operations and an economy that has expanded and diversified. The Stable Rating Outlook reflects the state's strong economic and revenue growth and sizeable balances.
Financial pressures include demands from rapid growth placed on the state's consumption-based tax system, large transportation needs, and the court mandate for education funding to comply with a June 1 State Supreme Court deadline.
Economic growth has accelerated, which, along with higher energy prices, has bolstered state tax revenues and cash balances. Employment increased 2.5% in 2005 and was up 2.4% in April compared to the same month the previous year. Revenue collections are well above original estimates and the general revenue fund cash balance, absent school funding reform, is conservatively estimated at $5.9 billion at the biennium end on Aug. 31, 2007. Debt ratios are low at 0.9% of personal income.
The legislature on May 16 passed legislation to address school funding and tax reform. The enacted legislation provides property tax relief by increasing the state's funding to in excess of 50% of school expenses by fiscal 2008, up from 36% in fiscal 2006. Other measures include teacher pay raises. Funding centers around a broadening of the state franchise tax as well as an increase in the cigarette tax. Increased revenues are projected by the Legislative Budget Board to be substantially less than the annual increase in costs when fully phased in. Nevertheless, the large general revenue fund cash balances are sufficient to fund requirements through the current biennium.
The bonds are the second to be issued under the mobility fund program. A state constitutional amendment that passed in 2001 created the Texas Mobility Fund to support transportation projects in the state. The Texas Transportation Commission is authorized to issue bonds backed by fund revenues and to pledge the full faith and credit of the state to the payment of the debt in the event that revenue and moneys dedicated to and on deposit in the mobility fund are insufficient. The commission is expected to exercise the general obligation full faith and credit pledge of the state, although the bonds are expected to be self-supporting through revenues dedicated to the mobility fund.
Dedicated fund revenues change over time. Through Aug. 31, 2005, traffic fines and license point surcharges, which became effective Sept. 1, 2003, have been dedicated to the fund. Thereafter, starting on Sept. 1, 2005, dedicated revenues comprise motor vehicle inspection fees, with the addition of driver record information fees on Sept. 1, 2006, driver license fees on Sept. 1, 2007, and certificate of title fees on Sept. 1, 2008. Had the mobility fund dedication schedule been in effect in fiscal 2005 the major revenue sources would amount to $341 million. Projected revenues in fiscal 2006 amount to $88.4 million and rise to $368 million by fiscal 2009. Program funds can be used for construction, reconstruction, acquisition and expansion of state highways and participation by the state in publicly owned toll roads and other public transportation projects.
Mobility fund obligations may only be issued if the comptroller certifies that mobility fund revenues each year, in which such obligations will be outstanding, will be equal to at least 110% of debt service requirements. The commission estimates total program capacity of at least $4 billion and plans to issue the full program by the end of fiscal 2008.
The proceeds of mobility fund bonds may be used to fund projects that measurably reduce congestion ('mobility projects') and are located in the eight largest metropolitan areas of the state; fund mobility projects in small urban areas and projects that will promote statewide connectivity; and pay issuance costs and right-of-way, consultant engineer, and other development costs.
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 'AA+' rating on Texas GO bonds reflects the state's low debt, conservative financial operations and an economy that has expanded and diversified. The Stable Rating Outlook reflects the state's strong economic and revenue growth and sizeable balances.
Financial pressures include demands from rapid growth placed on the state's consumption-based tax system, large transportation needs, and the court mandate for education funding to comply with a June 1 State Supreme Court deadline.
Economic growth has accelerated, which, along with higher energy prices, has bolstered state tax revenues and cash balances. Employment increased 2.5% in 2005 and was up 2.4% in April compared to the same month the previous year. Revenue collections are well above original estimates and the general revenue fund cash balance, absent school funding reform, is conservatively estimated at $5.9 billion at the biennium end on Aug. 31, 2007. Debt ratios are low at 0.9% of personal income.
The legislature on May 16 passed legislation to address school funding and tax reform. The enacted legislation provides property tax relief by increasing the state's funding to in excess of 50% of school expenses by fiscal 2008, up from 36% in fiscal 2006. Other measures include teacher pay raises. Funding centers around a broadening of the state franchise tax as well as an increase in the cigarette tax. Increased revenues are projected by the Legislative Budget Board to be substantially less than the annual increase in costs when fully phased in. Nevertheless, the large general revenue fund cash balances are sufficient to fund requirements through the current biennium.
The bonds are the second to be issued under the mobility fund program. A state constitutional amendment that passed in 2001 created the Texas Mobility Fund to support transportation projects in the state. The Texas Transportation Commission is authorized to issue bonds backed by fund revenues and to pledge the full faith and credit of the state to the payment of the debt in the event that revenue and moneys dedicated to and on deposit in the mobility fund are insufficient. The commission is expected to exercise the general obligation full faith and credit pledge of the state, although the bonds are expected to be self-supporting through revenues dedicated to the mobility fund.
Dedicated fund revenues change over time. Through Aug. 31, 2005, traffic fines and license point surcharges, which became effective Sept. 1, 2003, have been dedicated to the fund. Thereafter, starting on Sept. 1, 2005, dedicated revenues comprise motor vehicle inspection fees, with the addition of driver record information fees on Sept. 1, 2006, driver license fees on Sept. 1, 2007, and certificate of title fees on Sept. 1, 2008. Had the mobility fund dedication schedule been in effect in fiscal 2005 the major revenue sources would amount to $341 million. Projected revenues in fiscal 2006 amount to $88.4 million and rise to $368 million by fiscal 2009. Program funds can be used for construction, reconstruction, acquisition and expansion of state highways and participation by the state in publicly owned toll roads and other public transportation projects.
Mobility fund obligations may only be issued if the comptroller certifies that mobility fund revenues each year, in which such obligations will be outstanding, will be equal to at least 110% of debt service requirements. The commission estimates total program capacity of at least $4 billion and plans to issue the full program by the end of fiscal 2008.
The proceeds of mobility fund bonds may be used to fund projects that measurably reduce congestion ('mobility projects') and are located in the eight largest metropolitan areas of the state; fund mobility projects in small urban areas and projects that will promote statewide connectivity; and pay issuance costs and right-of-way, consultant engineer, and other development costs.
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.