Fitch Ratings has assigned an 'AA+' rating to the following Commonwealth of Virginia Commonwealth Transportation Board bonds:
--$49 million transportation contract revenue refunding bonds series 2012 (Route 28 Project).
Bond proceeds will be used to refinance the board's outstanding series 2002 bonds for debt service savings. The bonds are expected to sell competitively on May 9, 2012.
In addition, Fitch has affirmed the following outstanding ratings:
--Approximately $1.9 billion transportation board appropriation-backed transportation revenue bonds at 'AA+'.
The Rating Outlook is Stable.
SECURITY
The bonds are limited obligations of the board, secured by and payable solely from the trust estate, which includes as a primary revenue pledge a contractual property tax surcharge on real estate in the Route 28 highway improvement district. Additionally pledged are moneys appropriated and allocated under the highway allocation formula as provided by law to the highway construction district (Northern Virginia) or to the counties (Fairfax and Loudoun). Ultimate security for these bonds is derived from access to any legally available funds in the commonwealth's transportation trust fund.
KEY RATING DRIVERS
COMMONWEALTH APPROPRIATION OBLIGATION: The rating is based on ultimate access to legally available funds in the commonwealth's transportation trust fund and other general assembly appropriations.
TRANSPORTATION TRUST FUND OFFERS BROAD BACKSTOP: Access to the broad transportation trust fund provides backstop security, though revenue composition can be altered by the legislature.
AAA COMMONWEALTH GO RATING: The commonwealth's GO bonds are rated 'AAA' by Fitch, reflecting Virginia's substantial economic resources, conservative approach to financial operations, and lower-moderate debt burden.
CREDIT PROFILE
The 'AA+' rating is based on ultimate access to legally available funds in the Commonwealth of Virginia's transportation trust fund (TTF) and other general assembly appropriations. The Route 28 project contract revenue refunding bonds are limited obligations of the commonwealth and its transportation board, secured by and payable solely from the trust estate, which includes as a primary revenue pledge a contractual property tax surcharge up to $0.20 per $100 on commercial and industrial real estate in the Route 28 highway improvement district which is located in Fairfax and Loudoun Counties. Additionally pledged are moneys appropriated and allocated under the highway allocation formula as provided by law to the highway construction district (Northern Virginia) in which the project is located, or to the counties.
Ultimate security for these bonds is derived from access to any legally available funds in the commonwealth's transportation trust fund, and it is this access that affords the high quality credit rating. The TTF receives a variety of revenues representing various highway-related taxes and a portion of the state sales and use tax. Trust fund revenues totaled $1.015 billion in fiscal year (FY) 2011 and are projected to total $1.057 billion in FY 2012, with the slight increase attributable to rebounding economic conditions. Highway purposes are allocated 78.7% of TTF revenues. New construction spending in the commonwealth remains restrained as TTF revenues have supplemented maintenance and operation requirements.
Other commonwealth transportation bonds also have access to the TTF, including those issued for the commonwealth's Route 58 and Oak Grove Connector projects. Also, the board's capital project revenue (CPR) bonds which are secured primarily by insurance premium tax proceeds deposited in the commonwealth's priority transportation fund, have access to TTF funds if necessary. The CPR bonds were initially authorized in the amount of $3.18 billion and approximately $1.1 billion is currently outstanding. Coverage of projected maximum annual debt service, inclusive of planned CPR issuance, on all bonds that have access to the TTF by projected fiscal 2012 revenues is solid at over 2.6x.
The commonwealth's 'AAA' rating reflects its substantial economic resources, conservative approach to financial operations which includes periodic revenue forecast updates, and lower-moderate debt levels. For further information regarding the commonwealth see 'Fitch Affirms Virginia's $1.7B GOs at 'AAA'; Outlook Stable,' dated Feb. 13, 2012 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.
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
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648898
U.S. State Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648897
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