OREANDA-NEWS. November 18, 2015. Fitch Ratings has assigned an 'AA+' rating to the following transportation revenue bonds for the state of Wisconsin:

--\\$225 million transportation revenue bonds, 2015 series A.

The bonds are expected to sell via competitive sale as early as Nov. 17, 2015.

In addition, Fitch affirms the following ratings:

--\\$1.765 billion in outstanding state transportation revenue bonds at 'AA+'.

The Rating Outlook is Stable.

SECURITY
The bonds are revenue obligations of the state secured by a first-lien pledge on vehicle registration and certain related fees levied by the state.

KEY RATING DRIVERS
STABLE REVENUE SOURCE: The principal revenue source, vehicle registration fees, is narrow though stable over time, and the state has periodically raised revenues to augment coverage.

SATISFACTORY COVERAGE: The additional bonds test (ABT) requires that pledged revenues cover debt service by 2.25x, a satisfactory level. Coverage of maximum annual debt service (MADS) is ample.

RATING SENSITIVITIES
The rating is sensitive to changes to the state's practice of limiting leverage of the pledged revenue stream.

CREDIT PROFILE
The 'AA+' rating reflects ample coverage and security from a first claim on statutorily pledged program income (derived largely from motor vehicle registration fees) along with the satisfactory ABT of 2.25x and long track record of raising and expanding revenues as necessary. Pledged revenues are essentially a narrow single source and the larger transportation fund revenues are not pledged. The bonds being issued will fund major highway projects and transportation facilities.

SOLID COVERAGE FROM PLEDGED REVENUES
Vehicle registration fees equal 84% of total program income as of fiscal 2015; other registration-related fees pledged since 2003 include titling and personalized license plate charges. To provide additional revenues, fees have been periodically increased with the last increase effective Jan. 1, 2008.

The ABT requires 2.25x coverage by historical revenues, with the state targeting a minimum of 2.5x coverage by policy. Total pledged revenues in fiscal 2015 were slightly above estimate at \\$652.2 million, which provides 2.8x coverage of MADS (in fiscal 2017), including the current sale. Calculations of future debt service assume that previously authorized bonds are issued to refund outstanding transportation revenue commercial paper (CP) notes, whose pledge is subordinate to the bonds. Fiscal 2015 registration fees alone provide satisfactory coverage of MADS equal to 2.4x. During the forecast period from fiscal 2016 to 2023, annual coverage by all pledged revenues ranges from 2.85x in fiscal 2016to 3.8x in fiscal 2023.

While vehicle registration fees have provided ample coverage of debt service requirements, they are subject to changes in economic conditions. The state has a history of raising fees to support the program and augment coverage. For instance, it increased the automobile registration fee \\$20, to \\$75, and the title transaction fee \\$24.50, to \\$69.50 on Jan. 1, 2008. Registration fee revenues consequently rose 18.8% and 11.7% in fiscals 2008 and 2009, respectively, even as recessionary conditions slowed the growth of registrations to 1.1% and 1.2% during those years.

Registration fee revenues have fluctuated since then, reflecting in part the slow nature of the economic recovery and the state's biennial renewal process. Registration revenues declined 1.9% in fiscal 2011 but rose 3.2% in fiscal 2012. They declined a modest 0.62% in fiscal 2013, better than forecast, before rebounding a solid 4.1% in fiscal 2014, well above the 2.2% forecast growth. Registration revenues increased 0.6% in fiscal 2015, slightly above the 0.2% forecast growth rate. Average annual growth in registration revenues through the fiscal 2023 forecast period is approximately 1.5% annually.

FUTURE CAPITAL NEEDS
The fiscal 2016-17 biennial budget included authorization for \\$163 million in additional transportation revenue bonds and \\$687 million in general obligation (GO) bonds for transportation purposes. Of the authorized GO bonds, \\$350 million was contingent upon the administration requesting and the Legislative Joint Commission on Finance approving the additional bonding, both of which have since occurred.