NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the ratings on the following Commonwealth of Massachusetts bonds:
--Outstanding Commonwealth of Massachusetts general obligation (GO) guaranteed bonds issued by the Massachusetts Bay Transportation Authority (MBTA) and the University of Massachusetts Building Authority (UMBA) at 'AA+';
--Outstanding Route 3 North Transportation Improvements Association Commonwealth of Massachusetts lease revenue bonds at 'AA'.
The Rating Outlook is Stable.
SECURITY
The MBTA and UMBA guaranteed bonds are supported by a full faith and credit guarantee of the Commonwealth of Massachusetts.
The Route 3 North lease revenue bonds are limited obligations of the association, payable from annual commonwealth appropriations.
KEY RATING DRIVERS
COMMONWEALTH GUARANTEE: The 'AA+ long-term rating assigned to the MBTA and UMBA bonds is based on the rating assigned to the Commonwealth of Massachusetts' GO credit, reflecting the full faith and credit guarantee on the bonds.
APPROPRIATION COMMITMENT: Payment of the Route 3 North lease revenue bonds relies on annual commonwealth legislative appropriation, resulting in a rating one notch below Massachusetts' GO rating.
STRONG AND WEALTHY ECONOMY: Massachusetts has a broad and diverse economy with the second-highest personal income per capita in the nation.
PRUDENT FINANCIAL MANAGEMENT: The commonwealth has benefited from conservative budgeting and sound financial practices over time. A limitation on the use of capital gains-related tax revenue has reduced the volatility of economically sensitive revenues in the budget, and the commonwealth has shown a commitment to reserve funding.
COMPARATIVELY HIGH LIABILITY BURDEN: Massachusetts' debt levels are high for a U.S. state government, and Fitch expects them to remain so. This is partially explained by the above-average role played by the commonwealth in relation to local levels of government when compared to most other states. In addition, the commonwealth is responsible for the pension benefits of not only commonwealth employees but also teachers statewide, contributing to a combined burden of debt and pensions that is also well above the median for U.S. states rated by Fitch.
RATING SENSITIVITIES
COMMONWEALTH CREDIT QUALITY: The ratings are sensitive to changes in the commonwealth's GO credit standing, upon which the ratings are based.
CREDIT PROFILE
The commonwealth GO-guaranteed bonds being affirmed were issued by the MBTA and the UMBA. Both are recognized as contingent liabilities by the commonwealth. The commonwealth's GO guarantee applies to all MBTA bonds issued until July 1, 2000. As of Jan. 31, 2014, $389 million of such debt remained outstanding, with a final maturity in fiscal 2030. The UMBA had $127 million of commonwealth-guaranteed debt outstanding as of Jan. 31 out of a maximum of $200 million UMBA debt that can be covered by the guarantee.
Route 3 North lease revenue bonds are payable from annual commonwealth appropriations as basic rent under a sublease agreement. The commonwealth's appropriated basic rent payments provide for debt service on the bonds. The commonwealth's obligation to make rental payments is absolute and unconditional, without right of setoff, counterclaim or abatement, subject only to annual legislative appropriations.
The Route 3 North project was legislatively authorized in 1999 and was intended to relieve severe traffic congestion on the Route 3 corridor from the intersection with Interstate 95/Route 128 in the Boston area to the New Hampshire state line. The commonwealth has refunded the bulk of debt issued by the association with proceeds of GO bond offerings, and only a minimal amount of Route 3 debt remains outstanding.
For information on the Commonwealth of Massachusetts, see Fitch's press release 'Fitch Rates $250MM Commonwealth of Massachusetts GO MassDirect Notes 'AA+', dated March 13, 2014 and available at 'www.fitchratings.com'.
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=827023
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.