Fitch Rates Maryland Transportation Authority's Lease Revenue Refunding Bonds 'AA'; Outlook Stable

NEW YORK--()--Fitch Ratings assigns an 'AA' rating to the following Maryland Transportation Authority's (MDTA) lease revenue bonds:

--$27,565,000 (Metrorail Parking Projects), series 2014.

The bonds are expected to be sold competitively on Sept. 24, 2014. Proceeds will be used to currently refund the outstanding maturities of the MDTA's lease revenue bonds, Metrorail Parking Projects, series 2004 for level debt service savings.

In addition, Fitch affirms the following rating:

--$27.6 million MDTA lease revenue bonds (Metrorail Parking Projects), series 2004 at 'AA'.

The Rating Outlook is Stable.

SECURITY

The bonds are a limited obligation of the MDTA, payable from lease rental revenues made by the Washington Metropolitan Area Transit Authority (WMATA) under facility leases with the MDTA and from certain funds under a trust indenture, including the debt service reserve fund (DSRF). By terms of a deficiency agreement, Prince George's County, MD covenants to restore deficiencies in the DSRF, subject to annual appropriation.

KEY RATING DRIVERS

RATING BASED ON COUNTY'S CREDITWORTHINESS: The lease revenue bond rating reflects Prince George's County, MD's (the county) exceptional general creditworthiness (GOs rated 'AAA' by Fitch), offset by the contractual nature of the obligation.

ROBUST AND GROWING ECONOMY: The county benefits from its central location in the national capital region and its well-developed transportation infrastructure, attracting a strong base centered upon vital government operations and higher education. Prospects for continued growth are strong. Wealth indicators equal or exceed national averages.

RESERVE LEVELS REMAIN STRONG: The county has maintained a reduced but healthy fund balance, as reserves were utilized over the past several years due to cost pressures mostly related to public safety and aggressive revenue budgeting.

CONSTRAINED REVENUE-RAISING CAPACITY: Real property and income tax rate limitations restrict the county from increasing its two primary revenue sources. However, future grow prospects offset these limitations.

MODEST DEBT BURDEN: Debt levels are expected to remain moderate over the next few years. Manageable carrying costs coupled with rapid amortization enhance the debt position.

SIZABLE UNFUNDED PENSION LIABILITY: Pensions are underfunded despite the county fully funding its annual retirement contribution (ARC). Annual costs currently represent a manageable portion of total county spending.

PARITY ULTGO AND LTGO RATINGS: Fitch currently does not distinguish between the county's unlimited tax general obligation (ULTGO) and LTGO ratings due to the county's strong financial flexibility.

CREDIT PROFILE

RATING CONSIDERATIONS AND RESERVE DEFICIENCY MAKE-UP PROVISIONS

Fitch's rating on the lease revenue bonds reflects the county's 'AAA' GO rating, and incorporates risk related to the county's covenant to replenish any deficiency in the reserve fund, subject to appropriation by the county council.

Pursuant to the project agreement between WMATA, the county and MDTA and the deficiency agreement between the county and MDTA, if the trustee notifies the county and MDTA that the amount in the DSRF is less than the DSRF requirement as required under the trust agreement and there are insufficient funds in the surcharge reserve account available to make up any deficiency, the county shall make payment to the trustee to restore the DSRF to its required amount. To the extent sufficient funds from which any such payments can be made have not already been appropriated by the county in any fiscal year, the county executive will include in a supplemental appropriation request to the county council sufficient resources to reimburse the DSRF to its required amount in such fiscal year.

PRINCE GEORGE'S COUNTY-WMATA OVERVIEW

WMATA is an interstate agency formed to plan, construct, finance and operate a public transit system serving Washington D.C. and surrounding Virginia and Maryland suburbs, including Prince George's County. The county is obligated to provide certain capital support to WMATA.

The proceeds of the series 2004 bonds were used to finance a portion of the costs of development of certain projects located at parking facilities in Prince George's County at the College Park, Largo and New Carrollton Metrorail stations operated by WMATA.

MDTA expects to pay debt service on the lease revenue bonds from rental payments made by WMATA under certain facility lease agreements. Rental payments are payable solely from certain parking surcharge revenues, which are deposited into an account established for the county and held by WMATA in trust for the purpose of meeting WMATA's obligation under the facility lease agreements.

WMATA collects parking surcharge revenues from all 24,383 parking spaces within the county. During fiscal 2014 the surcharge generated $3.3 million in revenue, equal to 1.15x annual debt service or 1.34x projected maximum annual debt service (MADS). Projections show adequate coverage of between 2.14x and 2.19x annual debt service between fiscal 2015 and 2019, or 2x MADs. The increase in coverage is due to debt service savings following the refunding and an increase in the parking surcharge rate. WMATA has not covenanted to maintain parking surcharge rates at levels that will assure WMATA's ability to meet its obligation under the facility lease agreements. Further, WMATA's obligation to make rental payments is subject to abatement if more than half of the parking spaces become unavailable or unusable for a period in excess of 30 days.

PRINCE GEORGE'S COUNTY's 'AAA' STRENGTH

The county's own broad commercial base complements Washington D.C.'s diverse employment opportunities. Within the county, indispensable governmental bureaus and higher education, including Andrews Air Force Base and the University of Maryland, provide economic stability. The unemployment rate routinely hovers around that of the state and national averages. The June 2014 unemployment rate of 6.5% is notably less than the 7.5% of the prior year; employment trends have continued to remain positive. County wealth levels are below those of the wealthy region but above national indices.

For more information, see Fitch Research on "Prince George's County, Maryland," dated Sept. 10, 2014, available on Fitch's web site at www.fitchratings.com.

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

In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, National Association of Realtors, Virginia Employment Commission.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria' (Aug. 14, 2012);

--'U.S. Local 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. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=870334

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Contacts

Fitch Ratings
Primary Analyst
Evette Caze, +1 212-908-0376
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York NY 10004
or
Secondary Analyst
Casey Cathcart, +1 312-368-3214
Associate Director
or
Committee Chairperson
Amy Laskey, +1 212-908-0568
Managing Director
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Evette Caze, +1 212-908-0376
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York NY 10004
or
Secondary Analyst
Casey Cathcart, +1 312-368-3214
Associate Director
or
Committee Chairperson
Amy Laskey, +1 212-908-0568
Managing Director
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com