Moodys.com
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Rating Update:

MOODY'S AFFIRMS Aa2 RATING ASSIGNED TO MICHIGAN DEPARTMENT OF TRANSPORTATION'S STATE TRUNK LINE FUND REVENUE BONDS

24 Nov 2010

STABLE OUTLOOK APPLIES TO APPROXIMATELY $1.5 BILLION OF OUTSTANDING TRUNKLINE FUND DEBT

Other Sectors
MI

Opinion

NEW YORK, Nov 24, 2010 -- Moody's Investors Service has affirmed ratings of Aa2, with a stable outlook, assigned to the Michigan Department of Transportation's State Trunk Line Fund Refunding Bonds.

RATING RATIONALE:

The rating is based on expected strong coverage of maximum annual debt service from constitutionally dedicated highway revenues, a statutory limit on issuance of additional debt backed by the revenues, and relative stability of the revenues despite a recent history of declines.

Strengths:

-- First-lien pledge of constitutionally dedicated highway fees and tax revenues that are transferred to State Trunk Line Fund

-- More than adequate coverage of projected debt service by pledged revenues

-- Additional bonds test requiring two times debt service coverage

Challenges:

-- Weakening of pledged revenues caused by adverse economic and demographic conditions

-- Risk of declines in motor fuel tax use when prices are high

-- Statutory nature of additional bonds test

TRUNK LINE FUND PAYS FOR STATE'S FREEWAYS AND OTHER ROADS

State Trunk Line Fund bonds help finance the Michigan Department of Transportation's improvements of the State Trunk Line System, which encompasses interstate freeways, the Michigan expressway and arterial connector highways, and primary state roads. Bondholders have a first lien on the State Trunk Line Fund revenues from transportation taxes (portions of motor vehicle fuel taxes, vehicle registration taxes, and miscellaneous motor vehicle fees). There are currently about $1.5 billion of these bonds outstanding, and the state has no plans to sell additional parity bonds. The State Trunk Line Fund pays for all the operating and maintenance expenditures of the Trunk Line system, after covering debt service on the Trunk Line Fund bonds. Trunk Line monies available after payment of debt service and operations are allocated to construction projects and also provide state matching payments for federal funds on road construction projects.

DEDICATED REVENUE COLLECTIONS PLEDGED TO BONDHOLDERS

The state's constitution requires that at least 90% of motor fuel and registration tax receipts net of collection costs be used for roads and highways. These revenues, along with miscellaneous fees, flow to the Michigan Transportation Fund. After various deductions, transfers are made to the State Trunk Line Fund. Revenues of the fund, by statute, are irrevocably appropriated for, and pledged to, payment of Trunk Line Fund bonds.

REVENUES VULNERABLE TO ECONOMIC TRENDS

Revenues pledged to State Trunk Line Fund bonds include portions of motor vehicle fuel taxes (19 cents a gallon for gasoline and 15 cents for diesel), vehicle registration fees, and miscellaneous vehicle fees. These revenues are sensitive to Michigan's economy as well as other factors, such as motor fuel prices. Recessions historically have had pronounced effects on the state's transportation revenues. Growth in these revenues slowed to an average annual pace of 2.1% from fiscal year 2000 to fiscal 2003, for example, after running at about 5% in the 1990s. Some stability is provided through motor vehicle registration taxes. For vehicles other than trailers, registrations must be renewed annually. Registration tax collections are effectively inflation-indexed, because these levies are based on vehicle values. As a result, registration taxes have accounted for a growing share of total transportation taxes in recent years.

AMPLE COVERAGE OF MAXIMUM DEBT SERVICE PROJECTED

Revenue available for State Trunk Line Fund debt service for fiscal 2010 totaled $701 million, providing about 4.4 times coverage of the $160 million projected maximum annual debt service. This ratio, while less than the 4.8 times projected in 2006, remains ample. Motor fuel taxes and registration fees have both fallen -- by totals of 11% and 3%, respectively, in the past five years, reflecting adverse economic conditions. The authorizing statute, Act 51, allows additional issuance only to the extent the pledged revenues will cover resulting debt service by two times. The State Transportation Commission, a six-member body appointed to staggered three-year terms by the governor, has established an internal additional bonds test level requiring four times coverage. Under Moody's stress-test scenario, even if pledged revenues fall 5% annually during the next five years, debt-service coverage remains above three times.

DEDUCTIONS FROM DEDICATED REVENUES MAY REDUCE DEBT-SERVICE COVERAGE

As noted previously, the state collects constitutionally dedicated transportation revenues in its Transportation Fund. Distributions for various other purposes reduce the amount available for the State Trunk Line Fund. The first distributions made from the Michigan Transportation Fund cover the regular expenses of transportation tax collection, enforcement and administration, other administrative costs, and a portion of net gasoline tax receipts is used for state recreational facilities. The remaining Transportation Fund revenues are distributed according to a protocol that has been in place since Act 51 was enacted in 1951.

Moody's maintains a separate rating, currently Aa2 with a stable outlook, on the state's Comprehensive Transportation Bonds, which are also funded under the provisions of Act 51 and largely from revenues of the Transportation Fund. For both of these credits, the revenue allocation protocol is subject to amendment, and its provisions allow some flexibility with respect to allocations in any given fiscal year. Revenues backing both types of bonds are therefore subject to reduction, through legislation or executive action. Moreover, the state can affect the amount of dedicated revenues transferred to the trunk line fund by altering tax rates. Legislation lowering pledged tax rates or altering the allocation formula, however, would be invalid to the extent that it reduced revenues below the amount needed for debt service.

Outlook

The outlook for the State of Michigan's Trunk Line Fund bonds is stable, given adequate if somewhat reduced coverage of debt service requirements from constitutionally dedicated highway revenues. Bondholders are protected by legal provisions that require sufficient funds to be appropriated to make debt-service payments, and no further issuance of parity debt is anticipated.

What could move the rating up:

-- Adoption of stronger limits on program leverage through covenants in bond documents

-- Adoption of rate covenants to maintain minimum debt-service coverage levels

What could move the rating down:

-- Reduction or elimination of statutory additional bonds test language

-- Significant diminution in coverage caused by economic or demographic conditions, legislative actions, or increased debt issuance

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Analysts

Edward Hampton
Analyst
Public Finance Group
Moody's Investors Service

Marcia Van Wagner
Backup Analyst
Public Finance Group
Moody's Investors Service

Contacts

Journalists: (212) 553-0376
Research Clients: (212) 553-1653


Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

MOODY'S AFFIRMS Aa2 RATING ASSIGNED TO MICHIGAN DEPARTMENT OF TRANSPORTATION'S STATE TRUNK LINE FUND REVENUE BONDS
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR  PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​​​​​
Moodys.com