Fitch Rates Wisconsin's $117MM Petroleum Fee Rfdg Bonds 'AA-'.

NEW YORK -- Fitch Ratings assigns an 'AA-' rating to $117.3 million State of Wisconsin (the state) petroleum inspection fee revenue refunding bonds, 2009 series 1, expected via negotiation the week of Oct. 5. Refunding bonds mature July 1, 2013-2017 and are not callable. Fitch also affirms the 'AA-' rating on $88.7 million outstanding petroleum inspection fee revenue bonds, and the 'F1+' rating on $142 million outstanding extendible municipal commercial paper (EMCP) notes. The Rating Outlook on the long-term bonds is Stable.

Bond proceeds will be used to refund outstanding senior revenue bonds and take out half of outstanding EMCP notes. The bonds and notes are secured by a petroleum inspection fee paid by suppliers on all petroleum products received for sale in Wisconsin. The per gallon fee, levied at $0.02, is collected along with other motor fuel taxes by the department of revenue and distributed on a monthly basis to the bond trustee to pay debt service. Revenues have shown some volatility in the past, and fiscal year 2009 revenues are down 4.2%. Despite the decline, coverage levels remain satisfactory. Residual revenues are used for program expenses.

Factors mitigating the potential volatility of the revenues pledged to the bonds and the interest rate risk associated with variable-rate EMCP include an additional bond issuance test requiring 2 times (x) coverage of future maximum annual debt service (MADS) by historical revenues and the required monthly completion of a variable-rate capacity test to estimate the amount of variable-rate debt that could be funded by senior petroleum inspection fee revenue bonds while maintaining 2x debt service coverage. Petroleum inspection fees in fiscal 2009 covered debt service, including EMCP interest, by 2.6x. After this refunding, fiscal 2009 fees cover MADS, including projected EMCP interest by 2.3x. After rising 1.4% in fiscal 2008, to $76.6 million, receipts are estimated to have declined 4.2% in fiscal 2009, to $73.4 million.

Underlying the 'F1+' rating on the EMCP is the credit quality of the senior petroleum inspection fee revenue bonds to be issued to ultimately fund the notes and the market access of such bonds demonstrated in previous bond sales. Interest payments on the EMCP notes are paid on parity with the bonds' debt service. Principal payments are subordinate. The state has authorized and pledges long-term senior petroleum inspection fee revenue refunding bonds to ultimately take out the notes. The state intends, but is not obligated, to pay principal on the original maturity date from proceeds of rollover notes. The state has the option, however, to extend the maturity to 270 days from the original issuance date in the event of a loss of market liquidity and accordingly there is no liquidity provider.

The program has existed since 1987 and reimburses owners of petroleum storage tanks for 75%-99% of soil and groundwater contamination cleanup costs. When bonding for the program began in 2000, a backlog of approved but unpaid remediation claims was about $200 million; at present, unpaid claims total $0.2 million, with another $0.2 million under review. No additional bonding authority remains, except for refunding bonds and to take out existing EMCP; further bonding would require legislative authorization.

Additional information is available at 'www.fitchratings.com'.

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