OREANDA-NEWS. Fitch Ratings has assigned a 'AA' on the following securities of the Regional Public Transportation Authority, AZ (the authority or RPTA):

--$22.8 million transportation excise tax revenue refunding bonds (Maricopa County Public Transportation Fund, Series 2016).

The bonds are expected to price via negotiation as early as the week of April 4, 2016. Proceeds will be used to refund outstanding obligations for debt service savings without extending the final maturity.

Fitch currently rates the district's approximately $182 million in outstanding excise tax revenue bonds at 'AA'.

The Rating Outlook is Stable.

SECURITY

The bonds are special obligations of the RPTA, payable solely by a pledge of voter-authorized transportation excise tax revenues.

KEY RATING DRIVERS

SOLID COVERAGE; REVENUE VOLATILITY: Limited leverage and strong excise tax revenue growth result in healthy debt service coverage (DSC). DSC should remain solid due to continued expansion of the regional economy subsequent to the great recession and limited additional debt issuance plans. Nonetheless, above average revenue volatility represents an ongoing credit risk.

DIVERSE ECONOMY; POSITIVE TRENDS: The authority is coterminous with Maricopa County, the fourth largest county in the nation by population. Fitch anticipates further near term strengthening of favorable economic metrics, including its relatively low unemployment; long-term population and economic growth prospects are favorable.

LIMITED ISSUANCE; SOUND ABT: New issuance plans largely support system expansion, with practical limitations to leveraging based on expiration of the transportation excise tax in 2025. Based on limited issuance, Fitch expects maximum annual debt service (MADS) coverage to remain above 5x, which far exceeds the sound additional bonds test of 2.0x.

LIMITED RISK FROM OPERATIONS: RPTA's farebox recovery ratio is similar to other relatively young systems and the authority can cover debt service and operating expenses from total revenues with some cushion. Capital needs for infrastructure renewal and replacement, including planned system expansion, may be pressured in the event of slow growing transportation excise tax revenues.

RATING SENSITIVITIES

Coverage Adequacy: The rating is based on the continuation of sound coverage and limited new issuance plans.

CREDIT PROFILE

REGIONAL TRANSPORTATION PLAN

The RPTA, a political subdivision of the state of Arizona, has a core mandate to plan, develop and operate a regional transit system in Maricopa County. RPTA is overseen by a board of elected officials representing 16 municipalities in Maricopa County in addition to the county government.

In November 2004, Maricopa County voters approved Proposition 400 authorizing a 20-year extension of a half-cent transportation excise tax, originally approved by voters in 1985 through the passage of Proposition 300. Proposition 400 provides the major funding source for a 20-year regional transportation plan (RTP) developed by the Maricopa Association of Governments (MAG), the designated metropolitan planning organization for transportation planning in the Maricopa County region.

SOUND LONG-TERM ECONOMIC OUTLOOK

Maricopa County is the economic and population center of Arizona, encompassing Phoenix and surrounding suburbs within its 9,224 square mile boundary. The county's population expanded to 4.1 million residents in 2014, comprising 61% of the state's population. Maricopa County is home to 15 institutions of higher learning, various cultural attractions, several professional sports franchises, and one of the nation's busiest airports.

Unemployment generally trends below state and national levels, and was 4.7% as of December 2015. Median household income and personal income per capita approximate U.S. averages. IHS forecasts healthy population and employment growth over the intermediate term, which should bode well for transportation excise tax collections.

SOUND LEGAL PROTECTIONS

Proposition 400 extends the collection of the transportation excise tax through Dec. 31, 2025, which is six months beyond the scheduled final maturity date of the series 2016 bonds. The authority will receive collections through February 2026 based on a two-month collection lag.

The tax is collected by the Arizona Department of Revenue and remitted to the authority on a monthly basis. Revenues are deposited into the bond account held in trust for bondholders. After setting aside the required monthly deposits for debt service, the remainder is deposited into the public transportation fund (PTF) to fund capital costs, maintenance and operation of public transportation, and capital costs and utility relocation associated with light rail public transit. Bondholders have a first claim on amounts held in the bond account, with surplus balances after bondholder payment becoming available to the RPTA for any lawful purpose.

SOUND DEBT SERVICE COVERAGE

Fiscal 2016 projected pledged revenues of $133.5 million reflect six years of solid post-recession growth. Pledged revenues declined a cumulative 23.7% between fiscal 2007 and fiscal 2010. The most current forecast for future revenues generated by the Arizona Department of Transportation (ADOT) reflects long term annual average growth of about 5%, which while consistent with recent trends, may not incorporate downside economic cyclicality.

MADS of $24.2 million in fiscal 2022 is healthy at 5.26x based on audited fiscal 2015 revenues and improves to 5.51 x based on projected fiscal 2016 pledged revenues. Coverage responds well to stress and Fitch expects coverage to remain sound given the authority's limited additional issuance plans.

FLEXIBLE CAPITAL PLAN

The current five year capital plan totals about $950 million, with roughly 80% for rail and 20% for bus and other transit projects, the later focused on bus replacements and system expansion. Each year the capital program is reviewed and updated depending on forecasted revenues and member city decisions. Budgeted capital expenditures may be deferred depending on regional growth needs, pledged revenue trends and receipt of federal grant monies upon which the authority has modest reliance. The authority has prudently delayed implementation of various projects to ensure future costs remain in balance with funding sources, but uncertainty associated with economically sensitive revenues remains as a risk.