TEXAS PUBLIC FINANCE AUTHORITY'S WORKERS' COMPENSATION BONDS RATED 'A-' BY FITCH -- FITCH FINANCIAL WIRE
TEXAS PUBLIC FINANCE AUTHORITY'S WORKERS' COMPENSATION BONDS
RATED 'A-' BY FITCH -- FITCH FINANCIAL WIRE
NEW YORK, Dec. 9 /PRNewswire/ -- The Texas Public Finance Authority's $300 million Texas Workers' Compensation Insurance Fund, Maintenance Tax Surcharge Revenue Bonds, Taxable Series 1991 are rated "A-" by Fitch. The bonds will be sold through negotiation by a syndicate led by PaineWebber sometime this week. The bonds are not exempt from the federal income tax. The credit trend is stable.
Reforms to the Texas workers' compensation insurance market, including establishment of the Texas Workers' Compensation Fund with bond proceeds, should stabilize the industry and result in increased activity within the market. Such insurance, however, is voluntary in the state and the constitutionality of a major reform is uncertain at this time. Nonetheless, flexibility within the tax rate allows written premiums to fall substantially and still achieve debt service coverage.
Bond proceeds will be used to finance the surplus of a state-run workers' compensation insurance fund. The fund's establishment is part of a number of reforms recentlyc?ted to cure the problems of the workers' compensation market in Texas, including rate deregulation. The bonds are secured by proceeds of a surcharge assessed in addition to the maintenance tax currently levied on insurers writing workers' compensation policies in the state. The maintenance tax is limited to 2 percent, and an additional 1 percent may be levied if necessary for debt service on the bonds. Current estimates indicate that the 1992 combined rate would need to be approximately 2.69 percent, 0.86 percent for the maintenance tax and 1.83 percent for the year's debt service. The rate is projected to decline in future years, since next year's tax rate includes the funding of an additional year's principal and interest to serve as a debt service reserve. Sensitivity analyses show that the written premium tax base could fall by more than 40 percent from the current level and the maximum tax rate would still produce sufficient revenue to cover debt service.
However, some uncertainty surrounds the future of workers' compensation insurance in Texas. First, legislation passed in 1989 limiting benefit payments to injured employees is currently being challenged as unconstitutional. Second, the effect of premium rate deregulation and other reforms are expected to lower premium rates and increase activity, though the actual result remains to be seen. Lastly, workers' compensation insurance in Texas is voluntary, and, while a proven market has existed historically, if the recent changes result in substantial rate increases to employers, some may choose not to provide such insurance.
/CONTACT: Amy S. Doppelt, 212-908-0514, or David P. Wells, CFA, 212-908-0517, both of Fitch/ CO: Texas Public Finance Authority ST: Texas IN: SU: RTG FC -- NY059 -- 0637 12/09/91 14:47 EST