New York, October 13, 2022 -- Moody's Investors Service has assigned an A2 rating to the Maine Municipal Bond Bank's $46.4 million Grant Anticipation Bonds (Maine Department of Transportation), Series 2022A. We maintain A2 ratings on approximately $141 million of outstanding grant anticipation bonds issued by the Maine Municipal Bond Bank (MMBB). The outlook is stable.
RATINGS RATIONALE
The A2 rating on MMBB's grant anticipation bonds or GARVEEs reflects stable levels of pledged federal highway aid received by the Maine Department of Transportation (DOT), strong maximum annual debt service coverage provided by the pledged revenue, satisfactory legal provisions, and reauthorization risk of the federal aid highway program.
RATING OUTLOOK
The stable outlook is based on the additional funding from the Federal Highway Administration (FHWA) for the Federal Aid Highway Program (FAHP) under the Bipartisan Infrastructure Law and commitment of the US DOT to funding infrastructure projects, including roads and bridges. The rating and outlook incorporate the possibility of an interruption in grants provided it does not affect debt service payments.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING
- Enhancement of bond resolution protections against the risk of federal payment disruption
- A return to multi-year authorizations or the addition of a sustainable dedicated revenue source for the federal Highway Trust Fund (HTF)
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING
- A change in federal transportation policy that reduces or interrupts highway aid
- Sharp decline in underlying HTF revenue caused by economic stress, tax inefficiency or redirection of fuel taxes to the federal general fund
- Significant additional leverage that materially reduces coverage
LEGAL SECURITY
Maine's grant anticipation bonds or GARVEEs are payable from a first lien on federal transportation aid received by the Maine DOT, subject to allocation by the state legislature. The FAHP is a reimbursement program whereby the federal government agrees to pay the federal share on eligible transportation projects. The US DOT's FHWA processes the grants out of revenue from the federal HTF, which is funded by federal fuel taxes and transfers from the federal general fund.
Bond documents require the Maine DOT to seek obligation authority from the FHWA to pay for GARVEE debt service first, before any other uses, and as soon as practicable after the beginning of the federal fiscal year on October 1. Maine DOT is also required to request that debt service be included in the state's biennial budget. Maine DOT has assigned to the MMBB all present and future federal transportation funds subject to their receipt and allocation by the state for funding projects administered by Maine DOT. In practice, the state pays the bond trustee a few days before the debt service payment date and is then reimbursed by the FHWA.
USE OF PROCEEDS
Proceeds from the Series 2022A bonds will be used to finance various highway and bridge projects throughout the state that are eligible for federal aid.
PROFILE
The State of Maine is the 42nd largest state by population (1.4 million people in 2021) and the 43rd largest state by GDP ($76.1 billion in 2021 current dollars).
The Maine DOT is responsible for the state's transportation system, including more than 8,800 miles of highways, over 2,700 bridges, the Maine State Ferry Service, 588 miles of railroad track, and the Augusta airport.
The Maine Municipal Bond Bank was established in 1971 and is authorized to issue bonds mainly to provide funds to lend money to municipalities in the state. The bank is under the direction of a board of five commissioners, including the State Treasurer and the Superintendent of the Maine Bureau of Financial Institutions.
METHODOLOGY
The principal methodology used in this rating was US Public Finance Special Tax Methodology published in January 2021 and available at https://ratings.moodys.com/api/rmc-documents/70024. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.
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Pisei Chea
Lead Analyst
State Ratings
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Emily Raimes
Additional Contact
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