Fitch Affirms Ohio Turnpike Commission's $694MM Revs at 'AA'.

NEW YORK -- Fitch Ratings affirms the 'AA' rating on the State of Ohio's $694 million in outstanding turnpike revenue bonds issued by the Ohio Turnpike Commission (OTC). The Rating Outlook is Stable.

The 'AA' rating reflects the large and mature economy, as well as the strategically important transportation corridor that the OTC serves. The OTC connects the Indiana toll road and the Pennsylvania turnpike and links many of the largest cities within the State of Ohio. Due to its importance as an east-west connector in the interstate highway network, the OTC's service area extends well beyond the borders of the State of Ohio. Toll rates remain low in comparison with other U.S. toll roads. This economic rate-making flexibility, when coupled with the OTC's recovering financial position, the absence of near to medium term borrowing needs, and mature service area, all contribute to its 'AA' rating and Stable Outlook. Nevertheless, the OTC, similar to other toll agencies, is subject to political risks that may impact the timing and magnitude of rate increases, require it to undertake new obligations and contribute to changes in management and organizational structure.

Fitch expects that financial margins will stabilize through OTC's proactive management of periodically raising rates and managing expenses. Downward pressure on the rating could be manifested if the OTC's fiscal 2007 plan to raise toll rates and/or if near-term projected traffic and revenue estimates do not come to fruition. Given predictable and manageable future operating and capital requirements, and the absence of currently foreseeable additional debt, Fitch believes revenue and financial expectations are attainable.

In the summer of 2004, a program to encourage more trucks to use the Ohio Turnpike was implemented to mitigate safety issues on parallel roads. The program included: raising the commercial (truck) speed limit on the turnpike to 65 mph from 55mph; increasing truck weight limits and speed limit enforcement on parallel state routes; and lowering commercial toll rates for 18 months by an average 28 percent. To offset the temporary reduction in toll revenues and anticipated revenue loss, the Ohio General Assembly appropriated $23.4 million of fuel tax revenues ($1.3 million per month) from the Ohio Department of Transportation to the OTC over the 18-month period, ending June 30, 2006. While supplemental fuel tax funding will not be available after June, the OTC intends to continue the toll reduction through the end of the year despite no additional fuel tax revenues.

Commercial traffic increased 12% in 2005 due to the abovementioned program. Historically, commercial traffic has contributed between 56%-60% of total revenues of OTC, while representing only 20% of total traffic. OTC's reliance on commercial traffic, which is susceptible to economic cycles, as demonstrated by reductions in commercial traffic during recent recessions had a greater effect on financial performance due to escalating debt service obligations from the third lane project. The OTC's ability and willingness to raise rates on a timely basis and build cash flow and/or internal liquidity to cushion the effects of recessions is a key rating consideration. In 2005, toll revenues decreased 5.6% due to the commercial toll reduction; however, total revenues increased 3.6% due to the appropriated fuel tax revenues. Since 2000, toll revenues have remained generally flat while operating expenses have grown at 3.6% annually over the same time period, which is low compared to other toll facilities.

Debt coverage was 2.0 times (x) in 2005, after three consecutive years of coverage ranging between 1.75x - 1.95. Deterioration in coverage below 2.0x in recent years, prior to 2005, had been primarily due to a slowdown in traffic growth and reductions in investment income coupled with moderate growth in operating and maintenance expenses. Without the supplemental fuel tax revenues, fiscal year 2005 debt service coverage was 1.66x. Debt coverage for 2006 is expected to be between 1.8x and 1.9x due to the continued reduction of commercial toll revenues. With level debt service obligations and no additional debt needs forecasted, coverage levels should rebound to exceed 2.0 times (x) in the near term with the anticipated toll increase in 2007.

Most of the OTC's third lane capital project is now complete. Although the OTC, debt-free in the early 1990s, increased toll rates and issued a fair amount of debt for this project, its debt levels remain moderate for a turnpike. In fact, with future capital needs expected to be financed on a pay-as-you go basis, the OTC will likely be in a debt retirement mode for the foreseeable future, unless the state imposes a significant and unexpected capital mandate, which cannot be ruled out.

The Ohio Turnpike Commission operates the Ohio turnpike system, a 241-mile, east-west, limited access highway that traverses the state from the western border with Indiana to the eastern border with Pennsylvania. Sections of the turnpike are designated interstate routes 76, 80, and 90, all of which are major highway routes across the country.

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.