OREANDA-NEWS. February 19, 2016. Fitch Ratings has affirmed the 'A+' rating for approximately \\$30.6 million of Florida Department of Transportation (FDOT or the department) Alligator Alley revenue bonds. The Rating Outlook is Stable.

KEY RATING DRIVERS

The affirmation reflects Alligator Alley's (the parkway) continued strong traffic and revenue performance, resulting in robust debt service coverage ratios in excess of 5.0x. Metrics are expected to remain strong, supported by scheduled inflationary toll increases.

Revenue Risk: Volume - Midrange
Narrow Service Area: Alligator Alley is a critical link and the most efficient means of east-west surface transportation in the southern Florida area between the metropolitan centers of Miami and Naples, respectively. However, the narrow service area of the toll road, which provides connectivity only between these population centers, and its higher share of commercial traffic relative to other department-owned and operated roads, accentuate its exposure to economic downturns. Average toll rates are low at \\$0.043 on a per mile basis.

Revenue Risk: Price - Stronger
Strong Pricing Flexibility: Alligator Alley benefits from considerable economic rate-making ability and traffic has demonstrated relatively low elasticity to recently enacted toll increases. Toll rates are indexed to inflation with increases planned every five years for cash tolls and annually for SunPass tolls.

Debt Structure: Stronger
Conservative Debt Structure: All bonds outstanding are fixed rate bonds. Debt service schedule is flat with annual payments of \\$3.4 million through final maturity in 2027. No additional new debt issuances are anticipated in the near to medium term.

Infrastructure Renewal and Development: Stronger
Infrastructure Funded on Pay-Go Basis: It has been an FDOT practice to fund capital improvement projects on a pay-go basis. FDOT has an institutionalized practice to plan for, fund and implement major renewal and replacement projects on a regular basis.

High Coverage and Low Leverage: Alligator Alley maintains a very strong financial profile with a debt service coverage ratio (DSCR) of 5.82x and low leverage of 1.51x net debt to cash flow available for debt service (CFADS) for fiscal 2015 (ended June 30). Liquidity position is also strong. The parkway had 137 days cash on hand at fiscal year-end 2015, when including operation and maintenance (O&M) reserve, and also maintains a robust renewal and replacement (R&R) reserve, which can be drawn on to fund future capital expenditures.

Peers: Alligator Alley's peers include similar stand-alone/small network facilities such as Chesapeake Bay Bridge & Tunnel District (rated A-; Stable Outlook) and Fort Bend County (rated 'A+'; Stable Outlook). The parkway's toll rates are more favorable than its peers. Debt service coverage ratio and leverage are both stronger than Fort Bend's levels, while Chesapeake Bay Bridge has a higher DSCR and lower leverage.

RATING SENSITIVITIES
Negative: Significantly lower coverage levels as a result of traffic declines or unmanaged expense growth.
Negative: Plans by the state of Florida to add significant leverage to support non-facility investments.
Positive: Not expected in the near to medium term given the corridor strength and potential pressures to use funds to cover facility capital costs

SUMMARY OF CREDIT

Alligator Alley is a 78-mile, 4 lane, and limited access toll facility located in Collier and Broward Counties. The parkway is part of the interstate system (I-75) and begins east of Naples, extending to US 27 west of Fort Lauderdale. Truck traffic is high for the roadway, with commercial traffic accounting for 8% of fiscal 2015 traffic and has been relatively constant since 2012.

Traffic continues to show strong growth in fiscal 2015, with a 6.4% increase in transactions, which follows a strong 5.7% increase in 2014 and 0.6% in 2013. Increased traffic led to continued toll revenue growth, up 6.7% in fiscal 2015 and 6.5% in fiscal 2014. Year-to-date 2016 (Q1) transactions and revenues have both performed well, though the sample is small at only three months. Traffic is up 7.5% compared to the first 3 months of fiscal 2015, while revenue is up 8.1%.

Fiscal 2015 traffic and toll revenues outperformed Fitch's 2015 base case predictions, by 5.8% and 6.2%, respectively. Traffic has a 5-year growth rate (CAGR) of 2.4% and 10-year CAGR of 0.2%. Since the 2008 economic recession, traffic has increased at a CAGR of 1.0%. Revenues have comparatively seen stronger growth, due to enacted rate increases. This has allowed revenue to realize a 5-year CAGR of 7.4% and 10-year of 7.1%.

Fitch conducted several sensitivity scenarios. Fitch's base case scenario assumes annual traffic growth of 0.5% with the exception of years with toll increases which assumes a 1% decline along with moderate expense growth of 4%. Under these conditions, coverage remains very strong averaging 6.29x and not dropping below 5.47x through bond maturity in 2027. Parkway leverage also evolves downward to below 1.0x by 2019.

Fitch's rating case scenario represents an economic downturn, with the toll road experiencing a traffic decrease of 4% in fiscal 2016 followed by 8% in 2017. From fiscal year 2018 through 2020 there is no growth, with recovery beginning in 2021 at 1% and continuing thereafter. Operating expenses are stressed and grow at 5% per annum. Under this scenario, coverage remains above 4.40x with low leverage being maintained despite reaching 1.69x in fiscal 2017. Fitch notes that coverage levels produced under the stress case scenario are consistent with the current 'A+' rating. Breakeven analysis further supports this position, demonstrating the ability to tolerate significant sustained revenue declines without affecting the parkway's ability to service debt.

The five-year capital improvement program is estimated at \\$67.7 million, and is focused on safety improvements as well as rest area and toll system enhancements. No additional debt is expected to be issued as projects are funded on a pay-go basis.

SECURITY

The 2007A bonds are secured by a pledge of and first lien on, and will be payable solely from, the net revenues derived from the operation of Alligator Alley. Net revenues are defined as what remains after deducting the administrative, maintenance, and operating costs.