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Announcement:

Moody's places 28 GARVEE bond ratings on review for possible downgrade

Global Credit Research - 25 Sep 2012

Approximately $10 billion in debt outstanding affected; action does not impact those bonds with pledged state revenues

New York, September 25, 2012 -- Moody's Investors Service has placed 28 grant anticipation revenue vehicle (GARVEE) bond ratings on review for possible downgrade as federal transportation aid, which has financed $10 billion in debt outstanding, is subject to increased risk. Affected programs include 22 GARVEEs secured solely by a pledge of federal highway aid and six GARVEEs secured solely by a pledge of federal mass transit aid (see full list below). Please see the end of this report for a full list of affected debt.

GARVEEs are bonds issued by states or transit agencies and are backed by their shares of federal highway or transit aid. Federal fuel taxes are dedicated to fund the aid but the revenues raised have not been sufficient to pay for the authorized spending since 2008, requiring federal general fund support.

SUMMARY RATING RATIONALE

The review reflects the increased reliance on federal general fund support to maintain the current transportation funding program and the heightened risk to GARVEE debt service coverage levels if that general fund support decreases or is eliminated altogether. The passage of the current two-year transportation authorization bill was a break from historical practice—the prior three authorizations were five to six years in length. Additionally, funding the authorization required $18.8 billion in general fund support. The increased frequency of reauthorization risk and reliance on general fund transfers, which the White House Office of Management and Budget recently announced would be subject to budget sequestration, if the cuts go forward as scheduled in January, is indicative of increased political risk to the federal aid highway program. While we expect federal fuel taxes to be relatively stable over the life of the bonds, we do not expect revenue growth to resolve the structural imbalance in the highway trust fund.

During the review period, we will review each program including pledged revenues, coverage, covenant protections and other program characteristics. The review will be conducted within the context of Moody's U.S. Public Finance Special Tax Methodology, and we expect to conclude the review within the next 30-60 days.

List of affected issuers (with bond name in parentheses):

Alabama Federal Aid Highway Finance Authority (Federal Highway Grant Anticipation Refunding Bonds)

Alaska Railroad Corporation (Capital Grant Receipts Bonds)

Arizona Transportation Board (Grant Anticipation Refunding Notes)

California Department of Transportation (Federal Highway Grant Anticipation Bonds)

Chicago Transit Authority (Capital Grant Receipts Revenue Bonds)

Delaware Transportation Authority (Grant Anticipation Bonds)

District of Columbia (Federal Highway Grant Anticipation Revenue Bonds)

Georgia State Road and Tollway Authority (Federal Highway Grant Anticipation Revenue Bonds)

Idaho Housing and Finance Association (Grant and Revenue Anticipation Bonds Federal Highway Trust Fund)

Kentucky Asset/Liability Commission (Project Notes, Federal Highway Trust Fund)

Maine Municipal Bond Bank (Grant Anticipation Bonds )

Michigan (Grant Anticipation Bonds)

Montana DOT (Grant Anticipation Notes )

New Hampshire (Federal Highway Grant Anticipation Bonds)

New Jersey Transit Corporation (Senior and Subordinate Master Lease Certificates of Participation)

New Jersey Transportation Trust Fund Authority (Grant Anticipation Bonds)

North Carolina (Grant Anticipation Revenue Vehicle Bonds)

Ohio Department of Transportation (Major New State Infrastructure Project Revenue Bonds)

Oklahoma DOT (Grant Anticipation Notes)

Puerto Rico Highway and Transportation Authority (Grant Anticipation Revenue Bonds)

Rhode Island Economic Development Corporation (Grant Anticipation Bonds)

Southeastern Pennsylvania Transportation Authority (Capital Grants Receipts Bonds)

Tri-County Metropolitan Transportation District, OR (Capital Grant Receipt Revenue Bonds)

Washington (Grant Anticipation Revenue Bonds)

West Virginia Commissioner of Highways (Surface Transportation Improvements Special Obligation Notes)

The principal methodology used in this rating was US Public Finance Special Tax Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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 relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant 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 ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Moody's considers the quality of information available on the rated entities, obligations or credits satisfactory for the purposes of issuing these ratings.

Moody's adopts all necessary measures so that the information it uses in assigning the ratings 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 Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

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

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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 www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Julius Mavro Vizner
Asst Vice President - Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Nicholas E Samuels
VP - Senior Credit Officer
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's places 28 GARVEE bond ratings on review for possible downgrade
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