AUSTIN, Texas - (Business Wire) During the course of routine surveillance, Fitch Ratings affirms the following ratings for the City of Tucson, Arizona street and highway user revenue bonds:
-- $35.9 million senior lien bonds at 'AA-';
-- $88.8 million junior lien bonds at 'A+'.
The Rating Outlook for both bonds is Stable.
The bonds are secured by a lien on revenues derived by the city from highway user taxes and all other taxes, fees, and charges collected by the state and returned to the city for street and highway purposes as prescribed by law.
The ratings reflect solid debt service coverage and no near term plans for additional borrowing from this source. Also considered in the rating is the population and point of origin consumption-driven distribution formula for highway user tax revenues. Tucson has experienced less rapid population growth as compared to other Arizona cities, which has resulted in decreasing point of origin sales, contributing to a slowing, though still generally positive, rate of growth of highway user tax revenue collections for the city.
Highway user tax revenues consist of motor vehicle fuel taxes, motor vehicle registration fees, motor vehicle licenses taxes, motor carrier fees, motor vehicle operator's license fees, and other miscellaneous fees and revenues. Highway user tax revenues are collected by the state and deposited into the state highway user fund until distributed. Arizona cities and towns receive 27.5% of highway user tax distributions. One-half is distributed to cities and towns on the basis of population in proportion to all cities and towns in the state. The remaining one-half is distributed, first, on the basis of county origin of sales of motor vehicle fuels within the state, and second, to cities and counties on the basis of population in proportion to all cities and towns in the county. Arizona cities with populations exceeding 300,000 (including Tucson) also receive a 3% allocation for street and highway purposes.
Estimated fiscal 2008 revenues of $50.1 million generate debt service coverage of 5.6 times (x) of maximum annual debt service (MADS) on senior lien bonds, and 2.9x on MADS for all highway user bonds, including the $88.8 million junior lien bonds outstanding. There is no remaining street and highway user revenue bonding authority and the city has no immediate plans to seek additional voter authorization. All street and highway user revenue bonds outstanding mature by 2018.
Legal provisions provide adequate bondholder protections. They include an additional bonds test of 2x MADS for senior lien bonds outstanding and to be issued, as well as 1.5x MADS for senior lien and junior lien bonds outstanding and bonds to be issued. In addition to debt service payments, highway user tax revenues are used for capital projects and for staffing, maintenance and contractual expenses related to Tucson streets and highways.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings
Steve Murray, +1-512-215-3729 (Austin)
Andy Kaaz, +1-512-215-3730 (Austin)
Cindy Stoller, +1-212-908-0526
(Media Relations, New York)
cindy.stoller@fitchratings.com
