Published: March 09, 2011
Fitch Revises Outlook on Stand-Alone GARVEE Bonds to Negative
NEW YORK & BUENOS AIRES, Argentina - (BUSINESS WIRE) - Fitch Ratings has revised the Rating Outlook to Negative for all
Stand-Alone grant anticipation revenue vehicle (GARVEE) bonds. A
detailed report titled 'Fitch Revises Outlook to Negative on Stand-Alone
GARVEE Bonds' is being issued concurrently.
Outlook Reflects Potential Policy Changes:
Fitch revised the Outlook to Negative from Stable for all stand-alone
GARVEE bonds reflecting growing uncertainty in federal transportation
policy, less predicable funding levels, and a pending expiration of a
majority of federal motor fuel taxes. Pursuant to Title 23 of the U.S.
code, states and certain other regional entities are eligible to receive
federal grants for highway and transit infrastructure. Many grant
recipients have leveraged against anticipated grant receipts to
accelerate the delivery of infrastructure improvements. Despite being
secured by federal grant receipts, GARVEE bonds are not obligations of
the federal government.
Rationale for Negative Outlook:
In Fitch's view, what was once a formula-driven program funded on a
multiyear basis is now morphing into a program where future policy is
less certain, funding levels are less predictable, and the program is
more dependent on frequent action to extend authorization and on general
fund transfers that my need to be done on an annual basis absent a
gas-tax increase or a cut in spending. An additional complication is
that the authority to collect a majority of the motor fuel taxes and
other taxes that make up the primary revenue source for highway and
transit spending expires Sept. 30, 2011. While the previous
program(SAFETEA-LU) was reauthorized three months before the lapse of
the motor fuel and other taxes in 2005, we are six months away from the
lapse of the tax with little possibility for a solution in the near term.
The larger budget debate could continue well into federal fiscal year
(FFY) 2012, meaning that any progress on a longer term reauthorization
of the highway program appears unlikely, and that additional transfers
from the general fund may be necessary. In addition to how the program
is funded, questions about the level of spending and the appropriate
federal role are also being asked. Some key stakeholders feel that the
current program lacks clear policy direction and that devolving some or
all of the program to the states may be a preferred alternative to the
current redistribution of federal gas taxes. Tolling of the interstates
is one alternative that is being discussed. Devolving the program
through tolling or other additional state sources could result in the
same or increased resources available at the state level, but not to
GARVEE bondholders that are secured solely by federal grant receipts.
Complicating this dilemma is the fact fuel costs are on the rise,
meaning elected officials will continue to find it challenging to
support the gas-tax increase necessary to make the program
self-supporting. Given the uncertainty of the situation and the
increasing potential for significant changes in transportation federal
funding that could have a long-term impact, Fitch is revising the
Outlook to Negative from Stable for GARVEE bonds without a back-up
pledge of state resources. The GARVEE programs affected by this revision
include:
Alaska Railroad Corp.
Chicago Transit Authority
Georgia State Road & Tollway Authority
Idaho Housing & Finance Association
Kentucky Asset Liability Commission
Maine Municipal Bond Bank
New Jersey Transit Corp.
Oklahoma Department of Transportation
Rhode Island Economic Development Corp.
State of California
State of Michigan
State of North Carolina
State of Ohio
Additional information is available at 'www.fitchratings.com'
Related Research:
--'Rating Criteria for Infrastructure and Project Finance', (Aug. 16,
2010);
--'Rating Criteria for Toll Roads, Bridges, and Tunnels', (Aug. 10,
2010).
For information on Build America Bonds, visit www.fitchratings.com/BABs.
Applicable Criteria and Related Research:
Rating Criteria for Infrastructure and Project Finance
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548345
Rating Criteria for Toll Roads, Bridges, and Tunnels
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=543265
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 Ratings
Primary Analyst
Mike McDermott, +1-212-908-0605
Managing
Director
Fitch, Inc.
1 State Street Plaza
New York, NY
10004
or
Secondary Analyst
Chad Lewis, +1-212-908-0886
Director
or
Committee
Chairperson
Cherian George, +1-212-908-0519
Managing Director
or
Media
Relations:
Cindy Stoller, +1-212-908-0526
Email:
cindy.stoller@fitchratings.com
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