Fitch Ratings assigns a 'AA-' rating to approximately $150 million Missouri Highways and Transportation Commission Federal Reimbursement State Road Bonds, series 2008A. The Rating Outlook is Stable. The sale date remains flexible due to market uncertainty. Market changes and movements in interest rates could impact the Missouri Highways & Transportation Commission's (the Commission) debt costs. The bonds reach final maturity in May 2025. Bond proceeds will be used to finance the reconstruction of Interstate 64 in the St. Louis area.
The bonds are secured by a first lien on the Missouri State Road Fund's (the Fund) future receipts of federal highway funds under Title 23 of the U.S. Code and a fourth lien on state gas tax and motor vehicle fee revenues. Total GARVEE borrowings through 2011 under the Federal Reimbursement State Road Bond program are estimated at $935 million. There is currently $2.3 billion outstanding of outstanding gas tax debt on the first through third liens and a closed senior lien under the State Road Bond program.
The 'AA-' rating reflects the strength of the secondary pledge of state gas tax and motor vehicle fee revenues, the Commission's established internal debt management policies and the limitations on leverage of federal revenues that is expected to result in at least 2.0 times (x) coverage on the Commission's overall debt program. The rating incorporates the pledge of federal highway grants and the long history of federal transportation funding.
The key risk for these bonds is the significant amount of debt of the Commission and the lack of any legal restrictions solely tied to the fourth lien of gas tax debt. With the primary payment source of debt intended to be federal highway funds, the 24-year maturities planned for bonds issued under this program are a meaningful weakness at this rating level, but are offset by the pledge of state-controlled gas tax funds. Federal revenues remain vulnerable to significant changes in federal policy at the end of each surface transportation funding authorization period. While interruption in the flow of federal transportation funding is highly unlikely given the broad-based political support for the program the most recent multi-year reauthorization was significantly delayed. The Transportation Equity Act for the 21st Century (TEA-21) expired in 2003 without a successor program in place. 12 short-term extensions were passed but nearly two years passed before enactment of the Safe, Accountable, Flexible and Efficient Transportation Equity Act- A Legacy for Users (SAFETEA-LU) in 2005.
The State of Missouri serves as the collection agent for all revenue streams and provides administrative control over fund resources. Fitch rates Missouri's general obligation bonds 'AAA' with a Stable rating outlook. The Missouri Transportation Commission is vested with authority over the Missouri DOT and the state highway system as well as all other state transportation programs including aviation, railroads, mass transit and waterborne commerce.
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.