Fitch Rates Washington $450MM GOs 'AA'.
The 'AA' rated bonds, for separate bids, include:
-- $319.8 million various purpose bonds, series 2005D;
-- $85 million motor vehicle fuel tax bonds, series 2005E;
-- $45 million motor vehicle fuel tax bonds, series 2005F, with compound accreted value of $89.3 million at maturity.
The rating reflects the state's use of good debt and financial policies, as well as the breadth of the economy. In 2004, the Washington economy showed strength in recovering from the recession, as expansion in the Seattle area and the important aerospace industry accelerated. Diversification beyond the aerospace industry has occurred; Microsoft Corp., for example, employs half of its worldwide workforce in Washington. Still, Boeing Co. remains the largest private employer.
Washington's economy improved markedly in 2004, with employment growth of 2.4% exceeding the national average for the 12 months through December 2004. This growth allowed the state essentially to recoup the jobs lost during the 2001 recession. The economy had stabilized in 2003 due to strength outside of the Seattle area, but in 2004 growth there accelerated as well. Aerospace employment increased by 1,900 between December 2003 and December 2004 to 64,500 jobs, after falling 46% from its 1998 peak in prior years. Boeing's selection of Washington as the site for assembly of its new 787 aircraft enhances recovery prospects.
Financial conditions have improved with economic growth, but significant future budgetary gaps remain to be addressed. Through nonrecurring actions, the biennium ending June 30, 2003 closed with a balance of $462 million, or 4.5% of annual revenue. The budget for the 2003-2005 biennium addressed a gap of over $2 billion through cuts and spending redirection, including suspension of funding for classroom size reduction and other measures mandated by voter initiatives but subject to change by a legislative majority. Revenue forecasts have been upwardly revised throughout the biennium, and the general fund balance at June 30, 2005 is now projected to be $642 million, up from the originally projected $482 million.
The projected gap to be addressed in the budget for the 2005-2007 biennium is $2 billion, including $430 million resulting from a recent court decision striking down the state's estate tax. The governor will present her proposed 2005-2007 biennial budget in March following release of an updated revenue forecast.
Debt levels are moderate, but above average. Tax-supported debt is $10.6 billion, or $1,797 per capita and 5.2% of personal income. Motor vehicle fuel tax bonds, although general obligations, are serviced from that revenue source, which covers debt service by nearly 5 times (x), following a $0.05 2003 increase in the fuel tax. A total of $2.6 billion motor vehicle fuel tax bonds is expected to be issued through 2014 as the state funds a major transportation program from the fuel tax increase.
Series 2005D and 2005E bonds will mature Jan. 1, 2006-2030, callable beginning on Jan. 1, 2015. Series 2005F bonds mature Dec. 1, 2008-2029 and are noncallable.
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|Date:||Feb 24, 2005|
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