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20 Sep 2019
New York, September 20, 2019 -- Moody's Investors Service ("Moody's") has assigned Aa2 to Harris County Toll Road Authority, TX (HCTRA) approximately $92.0 million Toll Road Senior Lien Revenue Refunding Bonds, Series 2019A. The authority has approximately $1.58 billion parity senior lien revenue bonds rated Aa2. The outlook is stable.
The Aa2 reflects the HCTRA's strong financial position, evidenced by debt service coverage ratios (DSCRs) of all debt above 3.0x on Moody's net revenue basis, the draws from HCTRA's maturing system in the economically large and vibrant county centered on Houston. HCTRA serves a growing and increasingly diverse area economy that is highly dependent on HCTRA's roadway network for commuting. Moody's expects debt service coverage ratios for all obligations, including tax-supported debt, to remain above 3.0x and for senior lien revenue obligations near or above 4.0x. HCTRA's ability to fund its sizable $2.8 billion capital plan with existing reserves, annual net revenue and the remaining bond proceeds for the Series 2018A bonds while maintaining low leverage below 3.0x adjusted debt to operating revenue and strong liquidity above 1,000 days cash on hand is a strength. The rating is additionally supported by the good condition of HCTRA facilities, as assessed by an independent engineer, that provide for good operational performance and limited maintenance expenditures. Strong DSCRs and liquidity also mitigate revenue disruptions from localized flooding events in the region. Both the open flow of funds that supports annual transfers in excess of $120 million to the county for mobility projects and construction risk on the largest HCTRA capital project, the $962 million Ship Channel Bridge, weigh negatively on the rating. However, Moody's expects that HCTRA will hold to its plan to limit transfers during the capital plan and modest construction cost overruns can be accommodated while keeping DSCR and leverage at strong levels.
The stable outlook is based on Moody's expectation that traffic will grow due to service area expansion combined with improvements to the system to support strong DSCRs. The outlook also reflects the signed contract for the Ship Channel Bridge that will limit any cost increases over the next few years and limit the potential for increased leverage.
FACTORS THAT COULD LEAD TO AN UPGRADE
- At the Aa2 level, Moody's does not expect the rating to go up in the medium term though continued strong growth, low leverage and annual rate increases would contribute to positive pressure
FACTORS THAT COULD LEAD TO A DOWNGRADE
- Increased leverage due to cost overruns that lead to weakened financial metrics
- Total DSCR below 2.0x
- Adjusted debt to operating revenue above 5.0x
- Days cash on hand below 400 days
The senior lien revenue bonds are special obligations of the county, secured by a first lien on the trust estate established under the revenue bond indenture, which includes a gross pledge of funds in the debt service and debt service reserve fund (DSRF) and all revenues of the toll road system. The rate covenant requires toll revenue collection sufficient to produce revenues that provide at least 1.25x aggregate debt-service coverage on toll road senior lien revenue bonds accruing in such fiscal year. The senior lien DSRF is to be funded at not less than average annual aggregate debt service and not more than maximum annual debt service.
USE OF PROCEEDS
Proceeds from the Series 2019A refunding bonds will be used to refund outstanding bonds and pay issuance costs.
The HCTRA operates approximately 128 center line miles (or 753 lane miles) of roadway in the Houston / Harris County metropolitan area. The HCTRA system connects to toll roads in Ft. Bend and Montgomery counties.
The principal methodology used in this rating was Publicly Managed Toll Roads and Parking Facilities published in March 2019. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
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