Fitch Rates NYS Thruway $336MM PIT Revs 'AA-'.

NEW YORK -- Fitch assigns an 'AA-' rating to $336,245,000 New York State Thruway Authority state personal income tax (PIT) revenue bonds (transportation), series 2006A. The bonds will sell through negotiation with a syndicate led by Citigroup during the week of August 14. In addition, Fitch affirms the 'AA-' rating of approximately $6.3 billion outstanding PIT revenue bonds issued by New York state agencies and the 'AA-' rating of approximately $3.5 billion state general obligation (GO) bonds.

Underlying the 'AA-' rating on the PIT bonds are the importance of the PIT (about 60% of state tax receipts), the ample portion set aside for debt service, the trapping of funds if appropriation is not made, and the additional bonds test. Due to these strengths, the rating on the PIT bonds is equal to that assigned to New York's GO debt.

While payment of debt service is subject to appropriation, each month an amount equal to 25% of estimated PIT receipts (after refunds and deposits to the school tax reduction fund) is deposited into the revenue bond tax fund. The deposits are made from the withholding portion of the tax. After retention of 125% of financing agreement payments for PIT bonds due in the succeeding month, excess moneys are transferred to the state's general fund. Should amounts in the revenue bond tax fund be insufficient, the state comptroller is required to transfer from the general fund without the need for further appropriation. If no appropriation is made, deposits to the revenue bond tax fund are trapped and cannot be used (except for GO debt, if necessary), depriving the state of the moneys in excess of debt service.

PIT revenue available for debt service, as defined in statute, is estimated at $30.1 billion in 2006-2007 (88% withholding), up from $27.6 billion in 2005-2006 and $25 billion in 2004-2005, but lower than earlier estimates due to expansion of the local property tax relief program at the end of the state legislative session. For additional parity bonds to be issued, historical revenue bond tax fund receipts must cover future maximum annual debt service (MADS) on all PIT bonds by at least 2 times (x). After this issue, MADS coverage is about 10.5x by the $7.3 billion deposit to the revenue bond tax fund.

The State of New York's 'AA-' general obligation bond rating recognizes the state's recovery from the challenges experienced earlier in this decade, substantial wealth and resources, and broad economy, somewhat tempered by uneven performance across the state. Debt is expected to remain above average, but still in the moderate range, and pensions are well funded. Fiscal 2006 ended with a $2 billion surplus, after prepayments, and was the second year of base revenue growth higher than 10%, with particularly robust personal income (nonwithholding) and business tax receipts. The state's enacted budget for fiscal 2007, which began April 1, involved numerous gubernatorial vetoes that the governor's office maintained could not be overridden based on the governor's constitutional budget powers. The final budget, the result of an agreement reached before the end of the legislative session on June 23, increased fiscal 2007 spending and reduced reserves. Outyear gaps remain significant.

The Thruway Authority is one of the five agencies authorized to issue PIT bonds. The 2006A bonds mature March 15, 2007-2026, with call provisions to be determined.

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.