Fitch Rates Wisconsin's $394MM Transportation Revs 'AA+'

NEW YORK--()--Fitch Ratings assigns an 'AA+' rating to the following transportation revenue bonds for the State of Wisconsin:

--$310.935 million transportation revenue bonds, 2014 series 1;
--$82.675 million transportation revenue bonds, 2015 series 1.

The bonds are expected to sell via negotiated sale as early as March 19, 2014.

In addition, Fitch affirms the following ratings:

--$1.709 billion in outstanding state transportation revenue bonds at 'AA+'.

The Rating Outlook is Stable.

SECURITY

The bonds are revenue obligations of the state secured by a first lien pledge on vehicle registration and certain related fees levied by the state.

KEY RATING DRIVERS

STABLE REVENUE SOURCE: The principal revenue source, vehicle registration fees, is narrow though stable, and the state has periodically raised revenues to augment coverage.

SATISFACTORY COVERAGE: The additional bonds test requires that pledged revenues cover debt service by 2.25 times (x), a satisfactory level. Coverage of maximum annual debt service (MADS) is ample.

MODEST FORECAST GROWTH: Forecast annual growth in pledged revenues is modest and well under historical averages, although future transportation borrowing could narrow coverage.

KEY RATING SENSITIVITIES

The rating is sensitive to changes to the state's practice of limiting leverage of the pledged revenue stream.

CREDIT PROFILE

The 'AA+' rating reflects ample coverage and security from a first claim on statutorily pledged program income (derived largely from motor vehicle registration fees) along with the satisfactory additional bonds test of 2.25x and long track record of raising and expanding revenues as necessary. Pledged revenues are essentially a narrow single source (not constitutionally dedicated) and the larger transportation fund revenues are not pledged. The bonds are being issued for both new project needs and forward refunding purposes.

Vehicle registration fees equal 84% of total program income as of fiscal 2013; other registration-related fees pledged since 2003 include titling and personalized license plate charges. To provide additional revenues, fees have been periodically increased with the last increase effective Jan. 1, 2008.

The additional bonds test requires 2.25x coverage by historical revenues, with the state targeting a minimum of 2.5x coverage by policy. Total pledged revenues in fiscal year 2013 were slightly above estimate at $619 million, which provides 2.6x coverage of MADS (in fiscal 2015), including the current sale. Calculations of future debt service assume that $164 million in authorized bonds are issued to refund outstanding transportation revenue commercial paper (CP) notes, whose pledge is subordinate to the bonds. Fiscal 2014 registration fees alone provide satisfactory coverage of MADS equal to 2.2x. During the forecast period from fiscal 2014 to 2021, annual coverage by all pledged revenues ranges from 2.63x in fiscal 2015, the year of MADS, to 3.2x in fiscal 2021.

Vehicle registration fees historically have been a stable source of revenues, although they are affected by economic conditions. The state has a history of raising fees to support the program and augment coverage. For instance, it increased the automobile registration fee $20, to $75, and the title transaction fee $24.50, to $69.50 on Jan. 1, 2008. Registration fee revenues consequently rose 18.8% and 11.7% in fiscal 2008 and 2009, respectively, even as recessionary conditions slowed the growth of registrations to 1.1% and 1.2% during those years. Registration fee revenues have been generally flat since then, reflecting in part the slow nature of the economic recovery and the state's biennial renewal process. Registration revenues declined 1.9% in fiscal 2011 but rose 3.2% in fiscal 2012. They declined a modest 0.62% in fiscal 2013, better than forecast. The current state forecast is for 2.2% growth in fiscal 2014. Average annual growth in registration revenues through the fiscal 2021 forecast period is approximately 0.9% annually.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. State Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015
U.S. State Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686033

Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=824331
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Contacts

Fitch Ratings
Primary Analyst:
Karen Krop, +1-212-908-0661
Senior Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst:
Douglas Offerman, +1-212-908-0889
Senior Director
or
Committee Chairperson:
Marcy Block, +1-212-908-0239
Senior Director
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst:
Karen Krop, +1-212-908-0661
Senior Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst:
Douglas Offerman, +1-212-908-0889
Senior Director
or
Committee Chairperson:
Marcy Block, +1-212-908-0239
Senior Director
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com