OREANDA-NEWS. August 31, 2015.  Fitch Ratings has assigned an 'AA-' rating to the Florida Department of Transportation's (FDOT) approximately \\$196 million turnpike revenue refunding bonds series 2015B.

In addition, Fitch has affirmed FDOT's \\$3 billion outstanding turnpike revenue bonds at 'AA-'. The Rating Outlook on all bonds is Stable.

The 'AA-' rating reflects the mainline's standing as a major turnpike with history of strong traffic and increasing revenues and the strength of its service area. In addition, FDOT's capital improvement plan, while sizeable, has remained on time and on budget. A decreasing debt profile after maximum annual debt service (MADS) in 2019, coupled with strong toll revenues results in continued high coverage over the projection period, and breakeven analysis indicates that the toll agency could sustain continued substantial revenue declines without jeopardizing debt service.

KEY RATING DRIVERS

Revenue Risk - Volume: Stronger
Strategic Importance: Florida's Turnpike Enterprise's (FTE)'s toll roads comprise a critical transportation system with a mature traffic profile and established demand. As a result toll transactions have grown steadily since 1990, reaching a five-year compound annual growth rate (CAGR) for the period 2009-2014 of 1.8% as a result of increased demand as well as additional lanes and roadways. Fiscal year (FY) 2015 (ended June 30) year-to-date performance for the first eleven months has been strong, with transactions and toll revenues rising by 10.8% and 8.3%, respectively, compared to the same period in FY 2014. The network benefits from a strong commuter base that accounts for 95% of total transactions.

Revenue Risk - Price: Stronger
Strong Rate-Making Flexibility: Considerable economic flexibility exists to increase toll rates. Toll rates were increased effective June 24, 2012 for the first time since 2004. Per statute, annual increases indexed to the Consumer Price Index (CPI) will be applied to electronic payers going forward. Cash rate increases, also linked to CPI, will be implemented every five years. However, additional toll adjustments would also be permitted to meet rate covenant requirements and cover costs.

Infrastructure Development/Renewal: Stronger
Manageable Work Program: The turnpike's 2015-2020 proposed work program totals \\$4.7 billion which assumes approximately \\$777 million in additional borrowing during this period. While its current program is sizeable, FTE has a strong track record of delivering projects on time and on budget. Furthermore, its asset condition monitoring regime is considered robust.

Debt Structure: Stronger
Conservative Debt Portfolio: The turnpike's debt portfolio consists of fully amortizing, fixed-rate debt.

Financial Metrics:
Low Leverage and Solid Financial Margins: Leverage is moderate, currently being under 3x. DSCR increased to 2.80x in FY 2014 due to the indexing of electronic toll rates. Fitch expects DSCR to remain well above 2.0x for the foreseeable future after declining to 1.88x and 1.93x in FY 2011 and FY 2012 respectively.

Peers: Maryland Transportation Authority (MdTA)and Pennsylvania Turnpike Commission (PTC) are among FTE's closest peers, each operating strong turnpike systems comprising both urban and rural segments and having considerable pricing flexibility. While FTE and MdTA feature comparable DSCR and leverage profiles leading to ratings at the same level, PTC's higher debt burden and resulting weaker metric profile is the primary cause of its lower rating of 'A+' and 'A-' on first and second liens respectively.

RATING SENSITIVITIES

Negative - Declining Debt Service Coverage: Erosion of DSCR below 2.0x for a sustained period due to lower than anticipated revenues derived from toll increases would put pressure on the rating.

Negative - Financial Flexibility: Increases in leverage beyond historical levels as well as an inability to actively control operating expenses along with costs related to its work program would reflect a weakened credit profile.

Positive - Steady Financial Metrics: Completion of all debt raising activity related to the current capital improvement plan while maintaining DSCRs consistently at or above 2.5x and leverage not materially above 3.0x would lead to positive rating action.

CREDIT UPDATE

The series 2015B bonds will advance refund the series 2007A bonds for debt service savings. The maturity of the bonds will not be extended and debt service savings will be level over the remaining life of the bonds. Net present value savings of over \\$28 million, or 13% of the refunded bonds is projected.

Remaining work in FTE's five-year 2015-2020 capital improvement program is estimated at \\$4.7 billion dollars, with \\$777 million of additional debt funding over the next four years being required. The largest portion of the capital program is attributed to several major widening projects. Other notable projects include the expansion project on the First Coast Expressway and Suncoast Parkway 2, continued all electronic tolling improvements throughout the system, as well as canal barrier protection on mainline.

Under Fitch's base case scenario, which assumes 6.5% revenue growth for FY 2015 and 2% growth every year thereafter, along with moderate expense growth of 2.5%, net coverage remains above 2.78x through bond maturity along with sufficient cash flow available to fund most projects identified in the five-year CIP. Fitch's rating case scenario assumes a 5% decrease in toll revenues in FY 2016, with 1.5% growth following this drop, while operating expenses are stressed 100 additional basis points. Under this scenario, coverage remains above 2.54x with ample cash flow available to fund majority of the projects identified in the capital program. Coverage levels produced under the stress case scenario are consistent with the current 'AA-' rating. Breakeven analysis further supports this position, with FTE demonstrating the ability to tolerate significant sustained revenue declines without affecting its ability to service debt.

SECURITY

Turnpike revenue bonds are secured by a first lien on the net revenues of the turnpike.