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Fitch Rts Colorado Regional Transp Dist $65MM Sales Tax Rev Rfdg Bnds 'AA'.

NEW YORK -- Fitch rates the Regional Transportation District, Colorado's (RTD) $64,735,000 million sales tax revenue refunding bonds series 2007A 'AA'. The bonds will be sold through negotiation by Goldman, Sachs & Co. on or about March 6. Public Financial Management serves as the district's financial advisor. The Rating Outlook is Stable.

In addition, Fitch affirms the following ratings:

--$371.19 million outstanding sales tax revenue bonds (senior bonds) 'AA';

--$344.4 million outstanding certificates of participation (COPs) 'A+';

--$600 million in sales tax revenue bonds (FasTracks Project) 'AA-'.

The Rating Outlook for these issues is also Stable.

The 'AA' rating for this issue and the non-FasTracks outstanding sales tax bonds reflects strong debt service coverage by the bonds' first lien on RTD's initial 0.6% sales tax revenue, as well as a the closed nature of this lien. All three ratings are based on RTD's overall strong underlying credit fundamentals and flexible capital plan. In addition, Fitch's ratings on the district's sales tax bonds reflect their strong additional bonds tests, while the COPs rating is also based on a sound legal structure and strong incentive to pay, since a significant share of the transit vehicles are financed through these leases. (Fitch upgraded the rating on the outstanding non-FasTracks bonds - now referred to as senior sales tax bonds or senior bonds - and the COPs in Aug. 2006.)

In addition to strong debt service coverage by sales tax revenues despite declines a few years ago, RTD's other positive credit features include the economic base's sound underpinnings, effective utilization of debt instruments, and a willingness to increase fares. These actions partially offset the system's low farebox recovery ratio and pattern of over-estimated sales tax performance.

Debt service coverage is high for the senior bonds, with projected maximum annual debt service covered 6.4 times (x) by revenue from the 0.6% pledged sales tax in 2006 (unaudited). Coverage remains solid at 3.7x including principal and interest on COPS and commercial paper. RTD estimates debt service savings from this refunding at $2.6 million on a present value basis, 3.8% of the refunded par.

RTD's historical sales tax collections have exhibited sound growth overall, with some volatility year-to-year. Growth averages 5.8% per year over the long run (since 1992) and a still good 4.4% from 2003-2006. However, growth slowed to 2.6% in 2006, below the forecasted 4.9%, with the shortfall attributable at least partially to a severe snowstorm in December. Collections declined 6.3% from 2001-2003 and rose a small 0.2% in 2001. The tax is collected over a large and diverse area that includes Denver and much of its suburban surroundings. Fitch notes RTD's history of incorporating optimistic sales tax projections in its planning and budgeting. This concern is offset somewhat by management's monitoring of sales tax collections and effective actions taken to retain budgetary balance in response to recognized shortfall. Measures taken in recent years include delaying or eliminating capital projects, making service adjustments, and restructuring fares.

RTD has a low farebox recovery rate, relying instead on excess sales tax revenue to cover operating costs. On average the farebox ratio has met RTD's stated 20% goal, which is below national averages. The Jan. 1, 2006 fare restructurings, which included a 20% local fare increase, continued operating cost containment measures and a state requirement to use private contractors for 50% of service should act to increase this figure. Ridership trends remain strong, and growth was good in 2006 despite the fare increase and limited operations during a one week-strike in April. The 2006 better-than-expected ridership and fare revenue may be due in part to high gasoline prices.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.
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Publication:Business Wire
Date:Feb 16, 2007
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