Fitch Rates Georgia State Road & Tollway Authority's $19MM Guaranteed Revs 'AAA'

NEW YORK--()--Fitch Ratings has assigned an 'AAA' rating to the Georgia State Road & Tollway Authority's (SRTA) $19.355 million in state of Georgia (full faith and credit) guaranteed revenue refunding bonds, series 2016.

Precise par amounts will be determined at the time of sale, expected via competitive sale on or about July 20.

The Rating Outlook is Stable.

SECURITY

Special, limited obligations of the authority payable from pledged revenues, primarily a portion of motor fuel tax revenues, and guaranteed by the state and entitled to the full faith, credit and taxing power of the state.

KEY RATING DRIVERS

Georgia's 'AAA' Long-Term Issuer Default Rating (IDR) reflects the state's conservative debt management, proven willingness and ability to support fiscal balance and a broad-based and growing economy. The state took repeated budgetary action during the recession, including steep spending cuts and draws from its rainy day fund. Since then, Georgia has maintained a conservative approach to fiscal management by limiting spending growth and making progress rebuilding its reserves. The state's long-term liability burden is low.

Economic Resource Base: The state's economic profile is similar to that of the nation, with trade, transportation and utilities and various service sectors, including professional, business, education and health, representing the largest employers. Job losses during the Great Recession were particularly steep, but the state's recovery has outpaced the nation's. Georgia's demographic profile is somewhat mixed, with above-average population growth and a median age below the nation's, but it has weaker wealth indicators. Overall, these factors should support further solid economic growth.

Revenue Framework ('aaa' factor assessment):

Georgia's revenues, primarily consisting of income and sales taxes, will continue to reflect the depth and breadth of the economy and its solid growth potential. The state has complete control over its revenues, with an essentially unlimited legal ability to raise operating revenues as needed. A recent constitutional amendment limiting the personal income tax (PIT) rate does not limit Fitch's assessment since full flexibility remains for other revenue sources.

Expenditure Framework ('aaa' factor assessment):

The state maintains ample expenditure flexibility with a low burden of carrying costs and the broad expense-cutting ability common to most U.S. states. Also, as with most states, Medicaid remains a key expense driver, but one that Fitch expects to remain manageable.

Long-Term Liability Burden ('aaa' factor assessment): Georgia's long-term liability burden is low, and overall debt management is conservative. While the state issues bonds regularly for capital needs, amortization of principal is rapid. Additionally, Georgia fully funds its actuarially determined employer contributions (ADECs, formerly ARC) for pensions, keeping the unfunded liability very manageable.

Operating Performance ('aaa' factor assessment):

The state is well positioned to deal with economic downturns, with exceptionally strong gap-closing capacity due to its broad control over revenues and spending and rebuilt revenue shortfall reserve (RSR). Georgia has a track record of restoring financial flexibility during economic expansions, which is important given the state's above-average revenue volatility.

RATING SENSITIVITIES

FULL FAITH AND CREDIT PLEDGE: The ratings on the guaranteed revenue bonds are sensitive to changes in the state's IDR to which they are linked.

CREDIT PROFILE

The 'AAA' rating for SRTA guaranteed revenue bonds is based on the bonds' full faith and credit guarantee from the state and is thus equal to the state's IDR. Motor fuel taxes are pledged to the bonds and continue to provide full support for SRTA guaranteed revenue bonds.

The mechanics and administrative process around the guarantee support a rating equivalent to the state's IDR. Per statutory and constitutional provisions, prior to each issuance the legislature appropriates an amount equal to maximum annual debt service to a dedicated State of Georgia Guaranteed Revenue Debt Common Reserve Fund (CRF). The indenture requires that the trustee immediately notify the SRTA and the State Treasurer of pledged revenues insufficiency as of the debt service payment date. But practically, according to the state, such notification would actually occur at least five days earlier. Each month the SRTA transfers pledged revenues to the trustee for the bonds by the 25th day. Upon notification of insufficiency, the treasurer draws on the CRF to ensure timely debt service payments. The constitution requires any draw on the fund be replenished within 10 days of the start of a new fiscal year with no legislative action required.

For more information on the state's IDR, please see the Fitch release titled 'Fitch Rates Georgia's $1.4 Billion General Obligations 'AAA'; Outlook Stable', dated June 3, 2016 and available at 'www.fitchratings.com'.

Date of Relevant Rating Committee: June 3, 2016.

Additional information is available at 'www.fitchratings.com'.

In addition to the sources of information identified in the applicable criteria specified below, this action was informed by information from Lumesis and InvestorTools.

Applicable Criteria

U.S. Tax-Supported Rating Criteria (pub. 18 Apr 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=879478

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1008905

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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.

Contacts

Fitch Ratings
Primary Analyst
Eric Kim
Director
+1-212-908-0241
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Douglas Offerman
Senior Director
+1-212-908-0889
or
Committee Chairperson
Laura Porter
Managing Director
+1-212-908-0575
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
Email: elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Eric Kim
Director
+1-212-908-0241
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Douglas Offerman
Senior Director
+1-212-908-0889
or
Committee Chairperson
Laura Porter
Managing Director
+1-212-908-0575
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
Email: elizabeth.fogerty@fitchratings.com