Bangkok--30 Sep--Standard & Poor's
Standard & Poor's Ratings Services assigned its 'AA+' long-term rating to the state of Washington's $500 million motor vehicle fuel tax (MVFT) SR 520 corridor program toll revenue general obligation (GO) bonds series 2012A. In addition, we affirmed our 'AA+' long-term rating and underlying rating (SPUR) on the state's existing GO debt. We also affirmed our 'AA' rating on the state's appropriation-backed debt. The outlook on all ratings is stable.
The ratings reflect our view of the state's:
- Relatively well-educated workforce and good income indicators;
- Sales tax-based revenue structure that exhibits sensitivity to economic cycles, but to a lesser degree than those of states that rely primarily on personal and corporate income taxes;
- Good internal liquidity;
- Strong financial policies and practices, including consistently good responsiveness to recurring downward revisions to state revenue forecasts; and
- Moderately high per capita debt burden but well-funded pension plans.
"Our rating continues to reflect our view that the state's credit quality remains very strong despite a recent downward revision to its revenue forecast for the biennium," said Standard & Poor's credit analyst Gabriel Petek. Much of the downward revision was a function of macro and not state-specific economic factors, which remain largely favorable. Nonetheless, in response to the potential for reduced revenue, the governor has called for a special legislative session—once again demonstrating the state's consistent active budget management. Also, the majority of downward revenue revision is backloaded to the second year of the biennium allowing time for any budget adjustments to take effect. When coupled with the state's strong access to internal liquidity, we continue to view the state's credit as stable", added Mr. Petek."
The state's full faith, credit, and taxing powers secures the new series of bonds. The series 2012A bonds are first payable from a third-tier lien on toll revenue from the operation of the state's SR 520 corridor. The bonds are also payable from the state's MVFT revenues. The state will have a total of $17.2 billion GO bonds outstanding after the current offering. Of this, $6.3 billion of the state's GO debt is payable first from state excise taxes on motor vehicle and special fuels.
The state's independent economic and revenue forecast council revised down in September the state's revenue projections by $1.4 billion through fiscal 2013 If actual revenues materialize consistent with the forecast and no corrective measures were taken, the new lowered revenues stream would erase the enacted budget's ending reserve of $723 million and result in a negative $1.27 billion ending position in the general fund at the end of the biennium. Despite the negative revenue revision (equal to 4.7% of biennial revenue), we are maintaining the 'AA+' rating and stable outlook on the state's GO debt. Foremost, we continue to believe the state's economy will recover at a slightly faster pace than the nation. In addition, the state continues to exhibit responsiveness to recurring fiscal setbacks. Finally, the state's internal liquidity remains strong (despite negative cash in the general fund), and the projected revenue downturn is backloaded in the biennium, allowing time for budget adjustments to take effect.
RELATED CRITERIA AND RESEARCH
- USPF Criteria: State Ratings Methodology, Jan. 3, 2011
- USPF Criteria: Appropriation-Backed Obligations, June 13, 2007
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
Media Contact:
Ola Fadahunsi, New York (1) 212-438-5095,
[email protected]
Analyst Contacts:
Gabriel Petek, CFA, San Francisco (1) 415-371-5042
David G Hitchcock, New York (1) 212-438-2022