OREANDA-NEWS. Fitch Ratings has assigned an 'AA' rating to the following Regional Transportation Authority, IL bonds:

--Approximately $108 million general obligation (GO) bonds, series 2016A.

The bonds are scheduled to sell via competition on Jan. 13. Proceeds will finance a portion of the construction, acquisition, repair and replacement costs contained in the capital program.

In addition, Fitch has affirmed the following ratings:

--$2 billion GO bonds at 'AA';
--$90.825 million GO variable-rate notes (extendable reset securities) series 2005B at 'F1+'.

The Rating Outlook is Stable.

SECURITY
The bonds are general obligations of the Regional Transportation Authority (RTA), for which its full faith and credit is pledged. The RTA has pledged its allocation of sales tax and public transportation fund (PTF) revenue to repayment of the bonds.

KEY RATING DRIVERS

STEADY SALES TAX GROWTH: Sales tax revenues, RTA's largest revenue source, continue to improve with year-to-date collections up 4.9% through August 2015.

ESSENTIAL SERVICE: RTA serves as a vital component of the regional economy and provides an essential service to roughly 2.5 million riders daily.

STRONG GROSS DEBT COVERAGE: Historical gross debt service coverage from pledged sales tax and PTF revenues is projected to remain ample at above 7x. Coverage from net revenues is structured to produce slightly more than 1x coverage. The sales tax is assessed on a broad and diverse base, limiting the extent of cyclical sensitivity.

HIGH FAREBOX RECOVERY RATIO: The RTA is statutorily required to maintain a strong farebox recovery ratio among the three transportation systems of at least 50%, which is favorable relative to most peer transit systems. However, significant capital needs strain operations.

STATE PAYMENT DELAYS: State payment delays have ticked up, although they remain well below previous highs. The use tax component of the sales tax is held up pending passage of a state budget, but this represents a small percentage of revenues.

SHORT-TERM RATING FACTORS: The 'F1+' short-term rating reflects the adequate levels of liquidity, taking into consideration the authority's strong long-term credit quality and expected continued market access.

RATING SENSITIVITIES

INCREASED STATE PAYMENT DELAYS: A return to chronic delinquencies could adversely affect system maintenance, and present ongoing risk to the authority's financial health.

CREDIT PROFILE
RTA is the third largest transit system in the nation, serving a population of roughly 8.3 million located within the city of Chicago, suburban Cook County, and the counties of DuPage, Kane, Lake, McHenry, and Will (the collar counties). The authority is responsible for regional transit planning, and has financial and budget oversight over the three separate service boards: Chicago Transit Authority (CTA), Metra commuter rail, and Pace suburban bus. The RTA does not directly provide transportation services, and therefore its direct operations risk is very limited. However, it remains challenged to provide adequate operational and capital support to the aging transportation network.

LARGE SYSTEM SERVES DIVERSE CHICAGO METRO AREA
The service area population has increased modestly over the past decade, primarily due to growth in the collar counties. The service area is the economic engine for the Midwest region of the United States and residents are afforded abundant employment opportunities within this deep and diverse regional economy. The service area also benefits from an extensive infrastructure network, including the vast rail system, which supports continued growth. The employment base is represented by all major sectors with concentrations in the wholesale trade, professional and business services and financial sectors.
The authority generates revenues primarily from a sales tax levied within Cook and the five collar counties, as well as from PTF revenue, which is a statutorily required 30% state match of regional sales and real estate transfer tax for CTA generated within the city of Chicago.

Sales tax revenues accounted for 66% of total revenues in 2014 followed by PTF and various state payments that accounted for 34%. Of the sales tax revenues, 51% is generated within suburban Cook County, 33% in Chicago, and 16% in the collar counties. After payment of debt service, excess moneys are used primarily to subsidize the operations of the authority's three service boards.

STATE PAYMENT DELAYS
State remittance of PTF payments has been irregular since 2008. In 2011 and 2012, delays stabilized at around five to six months. Since then, the state has been running three-to-five months behind in remitting PTF payments.

The delayed state budget has had only a marginal adverse effect on liquidity. Approximately $3 million per month of use tax disbursements will not be distributed until the budget is adopted. RTA has authority for $400 million in short-term borrowing to offset any liquidity impact. Any need will be met through a combination of publicly offered and directly placed working cash notes.

STRONG DEBT SERVICE COVERAGE BY PLEDGED REVENUES
Gross debt service coverage levels are expected to remain strong given the significant demand on pledged revenues to fund the operating needs of the transit system after payment of debt service. Debt service coverage is expected to be 5.3x in 2015 from sales tax revenues, and the addition of pledged state PTF revenue raises coverage to 7.0x.

STEADY SALES TAX GROWTH
Economically sensitive sales tax revenues have rebounded from a 2009 low point and have shown steady year-over-year growth. Sales taxes grew 4.8% in 2013 and 4.9% in 2014, and year-to-date collections are up 4.9% through August 2015.

Increased sales tax collections have allowed the authority to increase disbursements to its service boards; projections show disbursements growing at a CAGR of 2.8%, 2.7%, 2.5% and 5.3% through 2018 for CTA, Metra, Pace and ADA paratransit, respectively. Should economic conditions change, Fitch believes management will continue to demonstrate a willingness to revise its budget.

HIGH FAREBOX RECOVERY
RTA continues to meet its statutory requirement of covering at least 50% of expenses from system-generated revenues. Farebox revenue has grown 3.9% on average annually since 2009 and the recovery ratio was a high 52.6% for 2014. CTA accounted for approximately 61.3% of operating revenues (exclusive of public funding), with Metra at 31.9% and the remainder made up of the Pace suburban bus system and ADA paratransit.

RIDERSHIP DECLINING OVERALL; INCREASING FOR RAIL
Total ridership in 2014 decreased by 2.3% to 636.5 million, and is estimated to decrease an additional 0.16% in 2015, to 635.5 million. RTA attributes the 2015 decrease to harsh winter weather, lower gas prices and fare increases. CTA Bus ridership has decreased in each of the last two years, by 5% and 9% respectively, and is at its lowest level since 2001, following nationwide declines in bus travel and a slight shift in passenger preference to rail. The RTA expects CTA Bus ridership to increase following the reestablishment of express buses and the completion of the Loop Link construction project. CTA Rail ridership increased approximately 4% in 2014 and RTA expects it to increase an additional 0.2% in 2015. Total CTA ridership represented approximately 81% of the region's rides in 2014 and RTA expects market share to remain flat in 2015.

Metra's ridership is expected to decrease in 2015 by 1.1%, driven by lower gas prices and a February fare increase. To address rolling stock investment needs, Metra will increase overall fares by an average of 2.3% in February, 2016. Pace's ridership is expected to decrease 3.9% in 2015 due to lower gas prices and route consolidation. Pace has proposed a fare increase of 25 cents for cash fares effective in January, 2016. Ventra Card riders will continue to pay the same $1.75 fare.

MAINTENANCE OF SYSTEM REMAINS A CHALLENGE
The RTA faces a serious challenge in the condition of its system assets. In particular, roughly 43% of CTA assets are in worn or marginal condition. The level of investment required to bring the system to a state of good repair greatly exceeds the authority's resources and borrowing authority.
The individual service boards are facing a backlog of $19.5 billion and a continued 10-year capital program totaling $36.1 billion to bring the system back to a state of good repair. RTA's 2016-2020 capital plan totals $3.9 billion, funded primarily by federal grants and additional RTA and CTA bonding. The backlog is thus expected to increase at current funding levels.

PENSIONS NOT A PRESSURE
The RTA participates in the RTA Pension Plan, a cost-sharing multi-employer pension plan for RTA, Metra and Pace. The plan was 72% funded on a market value basis as of Jan. 1, 2015. Fitch estimates the ratio to be somewhat weaker at 66.5% when adjusted to reflect a 7% investment rate of return. The plan has adopted a closed, 30-year amortization period and the authority has contributed well above the actuarially required amounts in recent years. The limited OPEB liability consists of full premium coverage for disabled pensioners and an implicit rate subsidy for all other retirees. Combined pension and OPEB costs are negligible at less than 1% of 2014 operating expenses.