Fitch Rates $44MM Rhode Island Econ Dev Corp Motor Fuel Tax Bonds 'A'.
The 'A' rating reflects the good legal protections governing the program, including the legislatively dedicated two cents of the state's 30-cent motor fuel tax that secures the bonds and the statutory cap on total debt and debt service. The pledged revenues are subject to state appropriation and there are covenants to include such amounts in the governor's proposed state budget. Once appropriated, pledged revenues are remitted to the trustee according to the payment agreement executed by key officials in the administration. The motor fuel tax bonds provide the state's approximately 20% share of four priority transportation projects to be financed primarily with federal transportation funds. One series of state motor fuel tax revenue bonds was sold in 2003, and a final offering of about $15 million is expected in 2009 to coincide with project construction.
Pledged revenues are stable but slow growing. The additional bonds test of 1.25 times (x) maximum annual debt service (MADS) is lenient, and coverage from dedicated revenue is narrow, although retention of residual funds for program purposes provides some offset. Coverage of projected MADS after all three issues is 1.25x based on 2005 revenues. For the bonds now offered and planned issuance, projected coverage is around 1.3x to 1.6x. There are provisions for a debt service reserve fund equal to 50% of MADS, which can be eliminated if coverage of 2x MADS is maintained for three years, as well as an additional 50% held in a residual reserve. Upon release from either reserve, surplus funds may be used for debt service and pay-as-you-go project costs.
These bonds are separately secured from grant anticipation bonds that are providing the remaining 80% of the priority transportation project costs. The second series of such bonds, repayable from federal transportation funds, is being issued concurrently with this issuance. The projects being constructed are critical to the state transportation program and are part of the approved multi-year transportation improvement program for the Rhode Island Department of Transportation (RIDOT).
The state imposes a 30-cent per gallon motor fuel tax, yielding $142.7 million in fiscal 2005, equal to $4.76 million per penny. Since 1994, motor fuel taxes have been credited to the Intermodal Surface Transportation Fund (ISTF). Motor fuel taxes are legislatively allocated to RIDOT, the state general fund, the department of elderly affairs for elderly transportation, and for public transportation. Since 1999, RIDOT's share of the motor fuel tax has been 20.75 cents, including the 2 cents for this program.
RIDOT is responsible for the construction and maintenance of nearly all state roads, bridges and transportation facilities, and administers the state and federal highway construction assistance programs.
The bonds will be due June 15, 2007-2026 and are callable beginning June 15, 2016.
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|Date:||Jan 23, 2006|
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