Fitch Affirms MA Turnpike Auth. West. Tpke Bnds at 'A+'; Stable Outlook.

NEW YORK -- Fitch Ratings affirms the 'A+' underlying rating on $211.2 million in outstanding Massachusetts Turnpike Authority (the authority) Western Turnpike revenue bonds 1997 series A. The 1997 series A bonds are insured by MBIA Insurance Corp., whose insurer financial strength is rated 'AAA' by Fitch. The Rating Outlook for the Western Turnpike bonds is Stable.

The 'A+' rating reflects the Western Turnpike's stable demand, strong debt service coverage on a net revenue basis, adequate reserves that allow for pay-as-you-go capital, moderate operating and facility reinvestment needs, and a level debt service profile. While the Western Turnpike retains economic rate-making flexibility, the ability to raise rates, if needed to accommodate additional reinvestment needs or greater than expected cost growth, is politically constrained given a prior history of removing tolls and the intention to eliminate existing tolls once outstanding debt is retired or defeased. The rating also incorporates the continued separation of the Western Turnpike from the financial obligations of the authority's Metropolitan Highway System (senior and subordinated bonds rated 'BBB+' and 'BBB', respectively, by Fitch).

The Western Turnpike, which is part of the nation's system of turnpikes extending from Chicago in the west to Boston in the east, has a stable and mature market base, serving a combination of commuter trips, longer distanced auto travel, and commercial truck traffic. Western Turnpike toll revenues grew by 3.2% annually between fiscal 2000 and 2004. Year-to-date toll revenues through June 2005 are down slightly by 0.5% reflecting the impact of severe winter weather earlier in the year. Net revenue coverage against debt service has been strong at more than 2.0 times (x) since fiscal 2000. The authority's forecast incorporates a conservative 1.2% annual growth rate for toll revenues and does not assume a toll increase, while annual operating expenses are projected to increase by a reasonable 4%. Net revenues are expected to cover debt at around 1.8x-2.0x over the life of the bonds under the authority's financial forecast.

Annual capital reinvestment in Western Turnpike facilities is expected to range from $27 million to $37 million during the remaining life of the bonds and are expected to be funded on a pay-as-you-go basis from the general fund. Based on this level of investment, the general fund balance would peak at $92 million by around 2007, but, without additional revenues, would be steadily reduced to around $15 million when the bonds are retired in 2017.

The Massachusetts Turnpike Authority, a public instrumentality of the Commonwealth of Massachusetts, is responsible for the operation of the Western Turnpike and the Metropolitan Highway System (MHS). The finances of the Western Turnpike, which includes the portion of the turnpike from the New York border in the west to its intersection with Route 128 in the east, are under a separate system from the MHS, which includes the Boston extension, the Sumner and Callahan tunnels, the Central Artery/Tunnel (CA/T) and the Central Artery North Area.

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