NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded the rating on the following Maryland Transportation Authority's (MDTA) lease revenue bonds to 'AA+' from 'AA':
--$23.9 million (Metrorail Parking Projects), series 2014.
The Rating Outlook is Stable.
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). In addition, by terms of a deficiency agreement, Prince George's County, MD covenants to restore deficiencies in the DSRF, subject to annual appropriation; this serves as the basis for the rating.
KEY RATING DRIVERS
The rating upgrade reflects application of Fitch's revised criteria for U.S. state and local governments, which was released on April 18. The revised criteria include more focused consideration of project factors in ratings for appropriation-backed debt; the bonds do not contain any of the risks that Fitch identifies for a rating more than one notch below the IDR. The lease revenue bond rating reflects Prince George's County, MD's general creditworthiness (GOs rated 'AAA'). The one-notch distinction reflects the county's obligation to replenish the DSRF which is subject to appropriation.
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.
Economic Resource Base
The county's economic base benefits from its location adjacent to Washington, D.C. as well as its intrinsically broad commercial base. Vital governmental bureaus and higher education provide economic diversity and stability. The county's estimated 2015 population of 909,535 has increased 5.3% since 2010.
Revenue Framework: 'aaa' factor assessment
The property and income taxes that support the county's budget are expected to continue to yield solid growth given positive housing value and construction prospects and strong income tax revenue growth. The county's independent legal ability to raise real property tax revenues is limited by county charter to $0.96 per $100 of assessed value. However, the rate can be exceeded for the purpose of funding the school's operating budget by a unanimous vote of the county council, state approval or voter approval, providing essentially unlimited independent legal revenue raising ability.
Expenditure Framework: 'aa' factor assessment
The county has the proven ability to reduce spending during an economic downturn. Fitch expects the natural pace of spending to grow in line with revenues over time.
Long-Term Liability Burden: 'aa' factor assessment
The county's combined debt and unfunded pension liability burden is low, but preliminary additional debt plans are large and could increase the county's debt ratios. The county is currently reviewing options to reduce the amount of debt needed to fund the plan.
Operating Performance: 'aaa' factor assessment
The county has maintained a healthy fund balance despite cost pressures and aggressive revenue budgeting. Recent tax and fee increases, an improving economy and more conservative budgeting have brought operations back into balance.
RATING LINKED to IDR of COUNTY: The rating is sensitive to shifts in fundamental credit characteristics including the county's modest long-term liability burden, solid financial resilience, and diverse economy. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.
Prince George's County 's 'AAA' Strength
The 'AAA' county rating that serves as the basis for the rating reflects its strong economic underpinnings, solid gap-closing capacity and low long-term liability burden. A demonstrated capacity to absorb the constraints of a recessionary revenue environment while maintaining a healthy financial cushion further supports the assignment of an 'AAA' rating.
The county's own broad commercial base complements Washington D.C.'s diverse employment opportunities. Within the county, governmental bureaus and higher education, including Joint Base Andrews and the University of Maryland, provide economic stability.
For more information, see Fitch Research on Prince George's County, Maryland, dated May 27, 2016, available on Fitch's website at www.fitchratings.com.
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.
U.S. Tax-Supported Rating Criteria (pub. 18 Apr 2016)
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