Fitch Ratings Affirms Colorado DOT TRANs Rating at 'AA'.

NEW YORK -- Fitch Ratings affirms the 'AA' rating on approximately $1.37 billion Colorado Department of Transportation (CDOT) transportation revenue anticipation notes (TRANs), series 2000, 2001A, 2002, 2002B, 2003A, 2004A and 2004B. The Rating Outlook is Stable. The bonds were sold to finance the construction of portions of the Strategic Transportation Project Investment Program (7th Pot), which includes 28 projects across the state.

The TRANs are secured by a pledge of the trust estate, consisting of annual allocations of federal transportation funds and state matching funds by the Colorado Transportation Commission (CTC). These funds are not subject to appropriation. Pursuant to a memorandum of agreement with the Federal Highway Administration (FHWA), CDOT bills the FHWA for federal transportation funds in the amount of project-related debt service. State matching funds are largely derived from the highway users tax fund (HUTF) which includes the state portion of the motor fuel tax and vehicle registration fees and under certain conditions and limitations, a transfer of 10.34% of the state sales tax and certain excess state revenues. Annual allocations of federal transportation funds and state matching funds for TRAN payments are at the sole discretion of the CTC, which has the responsibility for the approval and allocation of over 95% of CDOT's budget with the balance appropriated by the state general assembly. Issuance of the TRANs was authorized by title 43, article 4, part 7, Colorado Revised Statutes, and by voter approval in 1999. Issuance is limited to $1.7 billion, or $2.3 billion in total debt service.

Fitch's 'AA' rating reflects the dual pledge of federal transportation funds and state matching funds, with 2006 federal and state HUTF sources each covering MADS by 1.8 times (x) and 2.5x, respectively and an overall MADS coverage of 4.4x, the long-established track record of federal transportation funding, and CDOT's covenant that it will obligate funds as soon as practicable prior to or during any federal fiscal in an amount equal to the annual federal share year due in such federal fiscal year. In addition, the pledge of state matching funds and the pre-funding of the federal share with state matching funds offsets future federal surface transportation program reauthorization risk inherent in the bonds' original 14-year maturity. Additional issuance is permitted by the indenture as long as annual TRAN payments do not exceed 50% of federal transportation funds received in the immediately preceding fiscal year. However, the 2004 issuance put total debt service obligations at the $2.3 billion statutory cap so no further leveraging is authorized.

A key risk for these bonds, similar to other bonds secured by federal transportation funds, is the potential for significant changes in federal transportation funding policy with each new authorization period. While an interruption in the flow of federal transportation funding is highly unlikely given the broad-based political support for the program, a multi-year reauthorization of the federal surface transportation program was significantly delayed. The Safe, Accountable, Flexible, and Efficient Transportation Equity Act - A Legacy for Users (SAFETEA-LU) took nearly two years to enact. However, 12 short-term extensions were passed in order to continue the flow of federal transportation funds. The final funding level in SAFETEA-LU represents an approximately 30% increase in guaranteed funding for the federal fiscal 2004 - 2009 period over the prior Transportation Equity Act for the 21st Century federal fiscal 1998-2003 authorization period.

Continuing federal budget deficits and national security concerns coupled with the possibility of changing federal priorities and/or highway trust fund resource constraints do not guarantee that such federal transportation funding growth will continue during subsequent reauthorization periods. Assuming the continuation of six-year reauthorization cycles, the outstanding series 2002 and 2004 bonds are dependent upon the current and two additional federal reauthorizations. The pledge of state matching funds provides an important offset to this reauthorization risk.

CDOT is responsible for planning, development and construction of public highways and other components of the transportation network for the state. Currently, CDOT is responsible for 9,156 miles of state highways, including 3,714 bridges, serving 26.1 billion vehicle miles of travel.

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.