Key Takeaways
- Our analysis of the most recent net pledged revenue data for select U.S. state and transportation agencies' sales taxes indicates extraordinary growth in the last three years, along with mostly positive rating changes.
- Substantial sales tax revenue growth in 2022, spurred by inflation and strong consumer spending, strengthened sales tax bond coverage and general creditworthiness for several state and regional transportation agencies.
- We expect that pledged sales tax revenue growth will moderate in the near term, but sales tax bond ratings will remain generally stable, given the strong coverage metrics exhibited throughout the sectors.
In the last two years, U.S. issuers of sales tax bonds, or a combination of revenue streams with sales and use tax revenues representing the largest portion, have benefited from a combination of strong and resilient personal consumer spending and inflation reaching its highest point in decades. This drove tremendous sales tax growth for issuers across the country, since these taxes are levied on consumption transactions, such as goods and services, as a percentage of price. In addition, the pandemic's social distancing measures spurred more consumers to make purchases online, and state and local governments were able to collect taxes on those transactions, given the uncanny timing of South Dakota v. Wayfair, Inc. before the onset of the pandemic, which allowed governments to collect taxes from out-of-state sellers that meet economic nexus requirements.
In the near term, many issuers we rate are projecting moderating sales tax growth, which we believe is prudent, given our expectations for slower economic growth. We believe issuers that closely monitor actual revenue performance to track any deviations from projections will be better poised to navigate potential pressures from slowing growth, and given the very strong coverage metrics exhibited by both sectors, we expect ratings will remain stable.
Tremendous Sales Tax Revenue Boom
Based on our analysis of select state and transportation agencies' sales tax bonds using the latest net pledged revenue data, average maximum annual debt service (MADS) coverage is nearly 13x, which we view as very strong. Strengthening MADS coverage is aided largely by growth in pledged revenues averaging 33% over the last three years across both sectors, with no issuers reporting an aggregate loss over the period. These very strong figures highlight the extraordinary growth in sales tax revenue stemming from inflation's effect on prices and resilient consumer spending.
Chart 1
We expect sales tax-supported issuers will experience moderating revenues in the next year, given our forecast of slower economic growth. After robust consumer spending growth in 2021 and 2022, at 8.3% and 2.7%, respectively, S&P Global Ratings Economics forecasts 2023's consumer spending growth will be 2.5%, moderating to 1.4% in 2024. On a broader note, we are still forecasting economic growth, albeit meaningfully slower, and we will monitor if any individual revenue streams lag or outperform the projection. After core CPI inflation peaked at 6.2% in 2022, we expect it to continue to ease, falling below 3% next year but not comfortably near the Fed's inflation target before the fourth quarter of 2024. For more information, see "Economic Outlook U.S. Q4: 2023: Slowdown Delayed, Not Averted," published Sept. 25, 2023, on RatingsDirect. Following extraordinary growth in recent years, states are generally projecting subdued sales tax growth in fiscal 2024. According to the Urban-Brookings Tax Policy Center, state sales tax revenues are projected to increase by 1.7% in fiscal 2024, with only seven states forecasting growth of over 5%, in stark contrast with the robust growth seen in recent years.
These revenues' volatility on a macro level tends to be low, i.e., they experience little variance over multiple economic cycles. Additional debt plans vary by issuer, but given the very strong MADS coverage for states and transportation agencies (22.9x and 10.2x, respectively), we believe there is significant capacity to further leverage sales tax revenues for future issuances while maintaining rating stability. For more information on pledged revenue growth and individual credit metrics, see appendices 1 and 2.
S&P Global Ratings' Approach To Rating Sales Tax Secured Bonds
We apply our priority-lien criteria to evaluate sales tax secured bonds, examining both the ability of the pledged revenue to cover debt service and creditworthiness of the obligor issuing the bonds. For most sales tax bonds secured by statewide pledges, ratings are no higher than one notch above the linked obligor general obligation rating. However, it is more common for sales tax bonds issued by regional transportation agencies to be rated at least two notches higher than the linked agency's general creditworthiness, given what we view as their relative expenditure flexibility. Since January 2022, we raised the state sales tax senior- and junior-lien Build Illinois bond ratings twice as a result of Illinois' improved general creditworthiness. In the transportation sector, we upgraded eight sales tax bonds and made two outlook revisions; all changes were positive, except for one negative outlook assignment.
Five Years Since South Dakota v. Wayfair
The U.S. Supreme Court's 2018 decision in South Dakota v. Wayfair, Inc. paved the way for state and local governments to modernize their tax codes to collect sales taxes from out-of-state retailers. Most notably, a majority of state and local governments began requiring collection before the onset of COVID-19 and social distancing measures, potentially alleviating the actual impact shelter-in-place requirements had on tax collections as the pandemic unfolded. According to the North Dakota Office of the State Tax Commissioner, state sales taxes rose by more than 500% from May 2019 compared with May 2020. Since the decision, South Dakota's Department of Revenue reported approximately $4-$12 million in monthly sales tax revenues from remote sellers over the last five years. Overall, S&P Global Ratings recognizes that the ability of governments to receive collections from out-of-state retailers enhanced credit stability across the country.
State Sales Tax Bases And Rate Trends
As one of the primary sources of government revenue, sales tax growth was a large contributor to the anomalous revenue growth across the country in recent years. According to the U.S. Census Bureau, general sales and gross receipts taxes made up nearly 30% of total state tax collections in 2022. As sales tax collections continue to normalize, issuers are attempting to estimate the new standard growth rate for projections, following the atypical sales tax revenue growth in 2022, to ensure that expenditures are properly aligned.
A majority of states added sales taxes to their revenue streams to boost revenues amid budgetary pressures resulting from the Great Depression. The tax itself is on personal consumption, such as goods and services, and these expenditures have changed notably since this revenue stream was added to state tax codes. State sales tax bases--the items and transactions that are taxable--largely excluded services when they were designed.
However, in the last 50 years, personal consumption spending on services has risen at a much faster rate than spending on durable goods, resulting in different effects across sectors. For example, the U.S. consumer product sector continues to have one of the heaviest negative ratings biases across S&P Global Ratings' corporate ratings as of August 2023, caused by a variety of factors, including consumers' demand for experiences absorbing much of their discretionary income and leaving little for durable and apparel purchases. (For more information, see "A Second Half Rebound May Be Tall Order For U.S. Consumer Products Companies," published Aug. 21, 2023.) As this gap has widened, it has led to an erosion in government sales tax bases and policy debates about how to better incorporate personal consumption into tax codes. Even so, this widening gap has not affected U.S. public finance sales tax ratings to date, as revenue growth and tax rate increases have mitigated the effects.
Chart 2
Although the recent revenue boom led multiple states to lower income taxes, the trend did not widely transcend to sales taxes. According to the Tax Foundation, after extraordinary sales tax revenue growth in recent years, South Dakota was the only state to lower its sales tax rate as of July 2023, which is the most recent state sales tax rate reduction since New Mexico's in July 2022. South Dakota's sales tax rate reduction sunsets in 2027, which we believe is judicious, as it allows the state to evaluate if the lower rate is sustainable relative to its spending requirements. Similarly, according to the Federation of Tax Administrators, 18 states have had sales tax holidays in 2023, which is a temporary tax relief mechanism and does not limit sales tax revenues permanently.
As inflation spiked in 2022, leading to increased food prices, there has been a renewed debate among policymakers on the inclusion of groceries in state sales tax bases. While only a minority of states tax groceries, either at a full or reduced rate, several have taken action to eliminate groceries from the sales tax base. According to the Center on Budget and Policy Priorities, Virginia and Kansas have recently eliminated their sales tax on groceries (Kansas is phasing it out through 2025), and Alabama, Arkansas, and Tennessee have reduced theirs. In addition, Utah has a 2024 ballot measure that would conditionally remove its tax on groceries, if voters remove the limitations on the uses of its income tax. Sales tax revenues from groceries tend to have an underlying stability, as groceries are less discretionary purchases, but are essential transactions for households. Although it's not uncommon to see tax relief measures following the tremendous revenue growth in recent years, we believe it's prudent for issuers to actively track actual revenue performance once actions are fully implemented to ensure they maintain structural balance.
Transportation Sales Tax Trends
Our sector view of U.S. public mass transit operators remains negative, as many large agencies face headwinds from persistent lower ridership and the expected void left by the spenddown of $71.7 billion in pandemic-related federal aid. Ridership had been falling for several years before the pandemic and collapsed beginning in March 2020. However, lower ridership is now attributable to remote work patterns and, to a lesser extent, the reluctance of passengers to return to mass transit because of reliability, service levels, or safety concerns. The effects of lower ridership also trickle down to smaller revenue sources, such as advertising, concessions, and parking. (See "U.S. Transportation Infrastructure Transit Update: End Of The Line Nears For Federal Assistance As Low Ridership Pressures Operators," published Sept. 28, 2023.)
Tax and political support have been key to this developing credit story. So far in 2023, some transit systems have received interim and longer-term financial support from lawmakers and regional stakeholders. However, for most transit agencies, identifying a sustainable tax and revenue model to meet operating and long-term capital needs remains an ongoing topic of debate, setting up key decisions in the coming months that will pit service levels against available resources for 2024 and beyond. In the last two years, sales tax revenues provided significant, stable revenue for many agencies and, absent this revenue stream, the sector would have exhibited greater credit risk. As sales tax revenues become increasingly important for transportation agencies, we will be monitoring if this leads to any changes in pledged revenue performance or debt service coverage.
A major question is whether local or regional taxpayers will continue to view transit as an important public service worthy of tax support, particularly as some mass transit operators pursue ballot initiatives to potentially restore fiscal balance. Based on election results, the answer might be "more likely than not," but public sentiment is fickle and, like transit itself, outcomes are highly localized. Data from the American Public Transportation Association indicate voters considered 162 ballot initiatives between January 2018 and year-to-date September 2023, and approved 137, or 85%, for a total of $89 billion in new revenue to support mass transit operations or capital needs. In some regions, transit enhancements are sold as part of a broader mobility plan to ease traffic congestion by adding express bus lanes. Other regions are deep into building out light rail expansions, approved by voters several years ago and funded with regional sales tax measures. Local and regional sales taxes often have an expiration date requiring voters to approve an extension to continue or expand projects, but we expect that a slowing economy could lead to some mixed results in sales tax ballot measures, compared with the successes of recent years.
Looking Ahead
S&P Global Ratings expects that sales tax bond ratings will remain stable, albeit with much more moderated revenue growth than in 2022. As slower economic growth unfolds through 2024, we anticipate that weaker consumer spending, combined with easing inflation, will lead to slowing sales tax revenue growth, and it will be valuable for issuers to closely monitor revenue performance to ensure stability.
Appendix 1
| Select regional transportation agency sales tax bonds | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Issuer | Sales tax bond rating | Most recent net pledged revenue ('000s) | Revenue growth over the last three years | MADS coverage | Additional bonds test (x) | |||||||
| Bi-State Development Agency of MO-IL Metropolitan District | ||||||||||||
| St. Louis Cnty Prop A & St. Louis Prop M2 | AA/Stable | 163,506 | 8.4% | 6.4 | 1.80 | |||||||
| The Bi-State Development Agency senior lien sales tax bonds are secured by St. Louis, Mo.'s 0.25% Prop M2 sales tax enacted under the November 1997 Transit Sales Tax Act and St. Louis County's 0.5% Prop A transit sales tax enacted under the April 2010 Transit Sales Tax Act. The credit is supported by very strong economic fundamentals including a tax base that is considered broad and diverse. Revenue volatility is low and pledged revenues have grown 8% over the last three audited fiscal years. As a result of the increase in pledged revenues, debt service coverage improved to 6.4x from 5.6x in fiscal 2022. For the agency to issue additional debt, tax revenues from 12 consecutive months during the most recent 18 consecutive months must be at least equal to 180% of MADS for the outstanding and proposed bonds. Current MADS coverage of 6.4x is well above the 1.8x historical additional bonds test (ABT) for outstanding and proposed bonds. Given pledged revenue growth, we anticipate the credit will continue to maintain debt service coverage at levels we consider very strong. | ||||||||||||
| St. Louis & St. Louis Cnty Prop M | AA/Stable | 163,506 | 8.4% | 6.4 | 1.80 | |||||||
| The Bi-State Development Agency senior lien sales tax bonds are secured by a 0.25% Prop M transit sales tax enacted under the August 1994 Transit Sales Tax Act. The credit is supported by very strong economic fundamentals from a tax base that is considered broad and diverse. Revenue volatility is low and pledged revenues have grown 8% over the last three audited fiscal years. As a result of the increase in pledged revenues, debt service coverage improved to 6.4x from 5.6x in fiscal 2022. For the agency to issue additional debt, tax revenues from 12 consecutive months during the most recent 18 consecutive months must be at least equal to 180% of MADS for the outstanding and proposed bonds. Current MADS coverage of 6.4x is well above the 1.8x historical additional bonds test (ABT) for outstanding and proposed bonds. Given pledged revenue growth, we anticipate the credit will continue to maintain debt service coverage at levels we consider very strong. | ||||||||||||
| Central Puget Sound Regional Transportation Authority | ||||||||||||
| 1st lien | AAA/Stable | 2,075,034 | 22.9% | 46.6 | 3.00 | |||||||
| The Central Puget Sound Regional Transit Authority's senior lien bonds are secured by sales and use tax revenue, motor vehicle excise tax revenue and rental car tax revenue. The credit is supported by very strong economic fundamentals, supported by comparatively large and diverse economy within its taxing and service area encompassing the urban growth areas of King, Pierce, and Snohomish counties. The revenue volatility is low, in our opinion, and pledged revenue have grown around 23% over the last three audited years. We calculate that MADS coverage was very strong over the last three years, ranging from 24.9x to 46.6x. The senior-lien ABT requires historical tax revenues for any 12 consecutive months in the previous 18 months to equal at least 3x MADS on all debt outstanding and proposed debt. Given the stable revenue performance, we anticipate the credit will maintain very strong coverage in the near term, absent any recessionary pressure. | ||||||||||||
| 2nd lien | AAA/Stable | 2,075,034 | 22.9% | 13.0 | 1.50 | |||||||
| The Central Puget Sound Regional Transit Authority's second lien bonds are secured by sales and use tax revenue, motor vehicle excise tax revenue and rental car tax revenue. The credit is supported by very strong economic fundamentals, supported by comparatively large and diverse economy within its taxing and service area encompassing the urban growth areas of King, Pierce, and Snohomish counties. The revenue volatility is low, in our opinion, and pledged revenue have grown around 23% over the last three audited years. We calculate that MADs coverage was very strong over the last three years, ranging from 10.3x to 13.1x. The second-pledge ABT requires historical tax revenues for any 12 consecutive months in the previous 18 months to equal at least 1.5x MADS on all debt outstanding and proposed debt. Given the stable revenue performance, we anticipate the credit will maintain very strong coverage in the near term, absent any recessionary pressure. | ||||||||||||
| 4th lien | AA+/Stable | 2,075,034 | 22.9% | 5.7 | 1.10 | |||||||
| The Central Puget Sound Regional Transit Authority's fourth lien bonds are secured by sales and use tax revenue, motor vehicle excise tax revenue and rental car tax revenue. The credit is supported by very strong economic fundamentals, supported by comparatively large and diverse economy within its taxing and service area encompassing the urban growth areas of King, Pierce, and Snohomish counties. The revenue volatility is low, in our opinion, and pledged revenue have grown around 23% over the last three audited years. We calculate that MADs coverage was very strong over the last three years, ranging from 5.38x to 6.24x. The fourth pledge ABT requires historical tax revenues for any 12 consecutive months in the previous 18 months to equal at least 1.1x MADS on all debt outstanding and proposed debt, however, Sound Transit also has a 2.0x minimum coverage policy which it has historically exceeded. Given the stable revenue performance, we anticipate the credit will maintain very strong coverage in the near term, absent any recessionary pressure. | ||||||||||||
| Chicago Transit Authority | ||||||||||||
| 1st lien | AA/Stable | 966,279 | 41.4% | 3.5 | 2.00 | |||||||
| The Chicago Transit Authority's senior-lien receipts bonds are secured by pledged revenue deposited to CTA's sales tax receipts fund. Specifically, the pledged revenue consists of CTA's share of formula and discretionary funds, derived from: The Illinois Regional Transportation Authority's (RTA) broad-based sales tax collected in Chicago and Cook, DuPage, Kane, Lake, McHenry, and Will counties after debt service for the RTA's bonds backed by sales tax revenue is paid; the state sales tax revenue paid to the RTA by the state; and the public transportation fund revenue paid to the RTA by the state. In addition to the aforementioned revenue, real estate transfer taxes (RETT) in Chicago also secure the series 2008A and 2008B first-lien bonds. The city collects the RETT revenue and transfers it to the CTA. The credit is supported by very strong economic fundamentals for Chicago and the collar counties. Revenue volatility is low, in our opinion, and pledged revenue growth has been strong in recent years. We calculate that maximum annual debt service coverage was very strong over the last three years, ranging from 2.5x to 3.5x. The senior-lien ABT requires that tax revenues for any 12 consecutive of the previous 18 months equal at least 2.0x MADS on senior-lien debt. | ||||||||||||
| 2nd lien | A+/Stable | 966,279 | 41.4% | 3.0 | 1.50 | |||||||
| The Chicago Transit Authority's second lien sales tax bonds are paid from residual revenue in the sales tax receipts fund after senior-lien debt requirements have been met as well as from revenue in the debt service subaccount. The credit is supported by very strong economic fundamentals for Chicago and the collar counties. Revenue volatility is low, in our opinion, and pledged revenue growth has been strong in recent years. We calculate that maximum annual debt service coverage was very strong over the last three years, ranging from 2.2x to 3.0x. The ABT requires that, after senior lien debt is paid, tax revenues for any 12 consecutive of the previous 18 months equal at least 1.50x MADS on all debt outstanding and proposed second lien debt. | ||||||||||||
| Contra Costa Transportation Authority | AA+/Stable | 120,304 | 44.1% | 2.7 | 1.75 | |||||||
| The Contra Costa Transportation Authority's revenue bonds are secured by a 0.5% sales and use tax collected within Contra Costa County. The credit's very strong economic fundamentals are supported by the county's large population and high income levels, owing to its central location within the San Francisco MSA. Revenue volatility, in our view, is low, with pledged revenues growing 14.7% and 12.2% in 2021 and 2022, respectively. We calculate that MADS coverage was very strong over the last 3 years, ranging from 2.0x to 2.7x. The ABT requires historical tax revenues for any 12 consecutive months within the previous 18 months to equal at least 1.75x. However, we view the effective coverage test of 2.35x, which is derived from the restriction placed on capital spending and debt service at up to 42.5% of total sales tax revenues, to be a more accurate forward looking view of where coverage will fluctuate. | ||||||||||||
| Dallas Area Rapid Transit | AA+/Stable | 791,839 | 28.5% | 3.2 | 2.00 | |||||||
| The Dallas Area Rapid Transit's sales tax revenue bonds are secured by a 1% sales tax that is levied within the Dallas MSA. The credit is supported by very strong economic fundamentals reflecting a tax base located in the broad, diverse and growing Dallas MSA. Revenue volatility, in our view, is low with pledged revenues having grown 28.5% over the last three audited years. S&P Global Ratings calculated very strong debt service coverage over the last three years, ranging from 3.2x to 4.1x. The ABT requires either future gross sales tax revenues estimated by an independent economist or accountant over the following three consecutive years to provide at least 2x annual debt service coverage or that historical gross historical tax revenues for any 12 consecutive months in the prior 18 months to equal at least 2x MADS on debt outstanding and proposed debt. | ||||||||||||
| Greater Cleveland Regional Transit Authority | AAA/Stable | 259,184 | 23.8% | 18.2 | 2.00 | |||||||
| The Greater Cleveland Regional Transit Authority’s (RTA) senior lien bonds are secured by a sales tax collected by a 1% sales and use tax levied by the authority on all sales that are subject to sales and use taxes in Cuyahoga County. The sales tax collected by the Cleveland RTA include motor vehicle and parts dealers, miscellaneous store retailers, general merchandise stores, accommodation and food services, clothing, real estate and rental and leasing of property. The credit is supported by very strong economic fundamentals including a taxing base that is considered broad and diverse. Revenue volatility is low, with pledged revenues that have grown 23.8% over the last three audited years (2020-2022). As a result, debt service coverage increased from 14.83x to 18.19x over this period, and we anticipate GCRTA will maintain very strong coverage over the near-term given limited future capital needs and early defeasance of existing debt. The senior lien additional bonds test (ABT) requires revenues during the 12 consecutive calendar months in which sales tax revenues were the greatest out of the past 18 months immediately preceding the calendar month in which the additional bonds are to be issued to be at 2x MADS on all parity obligations and the additional bonds. | ||||||||||||
| Harris County Metropolitan Transit Authority | AAA/Stable | 727,151 | 26.8% | 7.4 | 2.00 | |||||||
| The Harris County Metropolitan Transit sales tax revenue bonds are secured by 75% of the 1% sales and use tax revenues levied and collected by the Authority. The credit is supported by very strong economic fundamentals, as pledged revenues are derived from the large and rapidly growing Houston MSA. Revenue volatility is low, in our view, with pledged revenues growing 10.3% to $632.6 million in fiscal 2021 and 15% to $727.2 million in fiscal 2022. We calculate debt service as very strong over the last three years, with MADS coverage ranging from 5.7x to 7.4x. Although we anticipate the authority to leverage additional debt to support capital improvement projects as part of its 20-year systemwide MetroNext Plan, which includes $3.5 billion in voter approved bonding authority, we expect steady pledged sales tax revenue growth to keep coverage metrics very strong in light of potential growth in future debt service requirements. The ABT requires historical tax revenues for any 12 consecutive months in the previous 18 months to equal at least 2x MADS on debt outstanding and proposed debt. | ||||||||||||
| Illinois Regional Transportation Authority | AA/Stable | 1,569,567 | 33.2% | 4.7 | 2.50 | |||||||
| Illinois Regional Transportation Authority’s bonds are secured by RTA's full faith and credit GO pledge, a first-lien pledge of its local sales tax and public transportation fund (PTF) revenue and other lawfully available funds received by the authority. The credit is supported by very strong economic fundamentals, with a tax base encompassing most of the large and diverse Chicago metropolitan statistical area (MSA). Revenue volatility is low, with pledged revenue growing about 33% over the past three years to $1.57 billion in fiscal 2022. We calculate debt service coverage as very strong over the last 3 years, ranging between 2.4x and 4.7x. The additional bonds test is based on sales tax revenue coverage alone, not factoring in PTF and other revenue. Additional obligations on parity with the authority's long-term bonds are subject to a revenue test that is equal to at least 2.5x MADS. The RTA may be tapped to address future budgetary needs for its service boards, which includes the Chicago Transit Authority which may pressure the authority. | ||||||||||||
| Imperial County Local Transportation Authority (Brawley) | A-/Stable | 2,331 | 36.5% | 3.6 | 1.30 | |||||||
| The Imperial County Local Transportation Authority’s sales tax revenue bonds are secured by Measure D sales tax revenue, a 0.5% retail sales and use tax levied on all taxable transactions with the county. County voters approved Measure D in November 2008 for a period of 40 years between April 1, 2010, and March 31, 2050. We assess Imperial County’s economic fundamentals as weak-adequate due to its high unemployment rate, its heavy dependency on agriculture which we view as cyclical, and persistent water rights issues. We assess revenue volatility as moderate as the county's retail sales have seen historical fluctuations though recent trends through fiscal years 2020-2022 have shown some positive growth and stability; fiscal year 2022 pledged revenues increased 15% to $2.3 million. Brawley’s 1st lien has historically maintained coverage above the ABT of 1.3x, ranging from 2.74x to 4.06x from fiscal years 2019-2021 with fiscal 2022 MADS coverage being 3.63x. We expect MADS coverage to remain very strong (above 2x) given the recent sales tax trends. | ||||||||||||
| Imperial County Local Transportation Authority (Calexico) | BBB+/Stable | 3,374 | 35.2% | 1.9 | 1.30 | |||||||
| The Imperial County Local Transportation Authority’s sales tax revenue bonds are secured by Measure D sales tax revenue, a 0.5% retail sales and use tax levied on all taxable transactions with the county. County voters approved Measure D in November 2008 for a period of 40 years between April 1, 2010, and March 31, 2050. We assess Imperial County’s economic fundamentals as weak-adequate due to its high unemployment rate, its heavy dependency on agriculture which we view as cyclical, and persistent water rights issues. We assess revenue volatility as moderate as the county's retail sales have seen historical fluctuations though recent trends through fiscal years 2020-2022 have shown some positive growth and stability; fiscal year 2022 pledged revenues increased 15% to $3.37 million. Calexico’s 1st lien has historically maintained coverage above the ABT of 1.3x, ranging from 1.4x to 1.65x from fiscal years 2019-2021 with fiscal 2022 MADS coverage improving to 1.88x. We expect MADS coverage to remain adequate given the recent sales tax trends. | ||||||||||||
| Imperial County Local Transportation Authority (Calipatria) | BBB+/Stable | 455 | 21.3% | 1.7 | 1.30 | |||||||
| The Imperial County Local Transportation Authority’s sales tax revenue bonds are secured by Measure D sales tax revenue, a 0.5% retail sales and use tax levied on all taxable transactions with the county. County voters approved Measure D in November 2008 for a period of 40 years between April 1, 2010, and March 31, 2050. We assess Imperial County’s economic fundamentals as weak-adequate due to its high unemployment rate, its heavy dependency on agriculture which we view as cyclical, and persistent water rights issues. We assess revenue volatility as moderate as the county's retail sales have seen historical fluctuations though recent trends through fiscal years 2020-2022 have shown some positive growth and stability; fiscal year 2022 pledged revenues increased 10% to $455,000. Calipatria’s 1st lien has historically maintained coverage above the ABT of 1.3x, ranging from 1.37x to 1.49x in fiscal years 2019-2021 with fiscal 2022 MADS coverage improving to 1.65x. We expect MADS coverage to remain adequate given the recent sales tax trends. | ||||||||||||
| Imperial County Local Transportation Authority (Holtville) | A-/Stable | 618 | 16.4% | 2.8 | 1.30 | |||||||
| The Imperial County Local Transportation Authority’s sales tax revenue bonds are secured by Measure D sales tax revenue, a 0.5% retail sales and use tax levied on all taxable transactions with the county. County voters approved Measure D in November 2008 for a period of 40 years between April 1, 2010, and March 31, 2050. We assess Imperial County’s economic fundamentals as weak-adequate due to its high unemployment rate, its heavy dependency on agriculture which we view as cyclical, and persistent water rights issues. We assess revenue volatility as moderate as the county's retail sales have seen historical fluctuations though recent trends through fiscal years 2020-2022 have shown some positive growth and stability; fiscal year 2022 pledged revenues increased 3% to $618,000. Holtville’s 1st lien has historically maintained coverage well above the ABT of 1.3x, ranging from 2.43x to 2.76x from fiscal years 2019-2021 with fiscal 2022 MADS coverage improving to 2.85x. We expect MADS coverage to remain very strong (above 2x) given the recent sales tax trends. | ||||||||||||
| Imperial County Local Transportation Authority (Imperial) | A-/Stable | 1,573 | 22.5% | 4.2 | 1.30 | |||||||
| The Imperial County Local Transportation Authority’s sales tax revenue bonds are secured by Measure D sales tax revenue, a 0.5% retail sales and use tax levied on all taxable transactions with the county. County voters approved Measure D in November 2008 for a period of 40 years between April 1, 2010, and March 31, 2050. We assess Imperial County’s economic fundamentals as weak-adequate due to its high unemployment rate, its heavy dependency on agriculture which we view as cyclical, and persistent water rights issues. We assess revenue volatility as moderate as the county's retail sales have seen historical fluctuations though recent trends through fiscal years 2020-2022 have shown some positive growth and stability; fiscal year 2022 pledged revenues increased 10% to $1.57 million. Imperial’s 1st lien has historically maintained coverage well above the ABT of 1.3x, ranging from 2.66x to 4.06x from fiscal years 2019-2021 with fiscal 2022 MADS coverage improving to 4.16x. We expect MADS coverage to remain very strong (above 2x) given the recent trends of sales tax trends. | ||||||||||||
| Imperial County Local Transportation Authority (Imperial Cnty) | A-/Stable | 5,748 | 37.5% | 4.4 | 1.30 | |||||||
| The Imperial County Local Transportation Authority’s sales tax revenue bonds are secured by Measure D sales tax revenue, a 0.5% retail sales and use tax levied on all taxable transactions with the county. County voters approved Measure D in November 2008 for a period of 40 years between April 1, 2010, and March 31, 2050. We assess Imperial County’s economic fundamentals as weak-adequate due to its high unemployment rate, its heavy dependency on agriculture which we view as cyclical, and persistent water rights issues. We assess revenue volatility as moderate as the county's retail sales have seen historical fluctuations though recent trends through fiscal years 2020-2022 have shown some positive growth and stability; fiscal year 2022 pledged revenues increased 37% to $5.74 million. Imperial County’s 1st lien has historically maintained coverage well above the ABT of 1.3x, ranging from 2.61x to 3.76x from fiscal years 2019 to 2021 with fiscal 2022 MADS coverage improving to 4.36x. We expect MADS coverage to remain very strong (above 2x) given the recent sales tax trends. | ||||||||||||
| Los Angeles County Metropolitan Transportation Authority | ||||||||||||
| Prop A 1st lien | AAA/Stable | 818,400 | 32.3% | 6.4 | 1.15 | |||||||
| Los Angeles County Metropolitan Transportation Authority’s senior-lien Proposition A (Prop A) sales tax revenue bonds are secured by a gross pledge of Proposition A first-tier senior sales tax revenues. The credit has very strong economic fundamentals, supported by Los Angeles County's very strong, large, broad, and diverse economy given its role as a major economic hub of regional and national importance, with more than 10 million residents. Revenue volatility is low, with pledged revenue growing about 32% over the past three years to $818 million in fiscal 2022. We consider MADS debt service coverage as very strong, ranging between 3.86x and 6.4x from fiscals 2020 to 2022. An additional bonds test (ABT) that effectively requires historic revenue to produce MADS coverage of no less than 2.46x. | ||||||||||||
| Prop A 2nd lien & Prop C | AA+/Stable | 1,691,366 | 32.3% | 4.8 | Closed | |||||||
| Los Angeles County Metropolitan Transportation Authority’s general revenue bonds (GRBs) are secured by subordinate lien on Proposition A (Prop A) and Proposition C (Prop C) countywide sales tax revenues. The credit has very strong economic fundamentals, supported by Los Angeles County's very strong, large, broad, and diverse economy given its role as a major economic hub of regional and national importance, with more than 10 million residents. Revenue volatility is low, with pledged revenue growing about 32% over the past three years to $1.69 billion in fiscal 2022. We consider MADS debt service coverage as very strong, ranging between 3.61x and 4.83x from fiscals 2020 to 2022. The GRB lien is closed to future borrowing. The GRB credit benefits from the borrowing restrictions on the Prop A senior-lien and Prop C senior-lien. | ||||||||||||
| Measure R 1st lien | AAA/Stable | 927,500 | 32.5% | 7.0 | 2.50 | |||||||
| Los Angeles County Metropolitan Transportation Authority’s senior-lien Measure R sales tax revenue bonds are secured by Measure R sales taxes that are collected at a rate of 0.5% on retail sales throughout Los Angeles County. The credit has very strong economic fundamentals, supported by Los Angeles County's very strong, large, broad, and diverse economy given its role as a major economic hub of regional and national importance, with more than 10 million residents. Revenue volatility is low, with pledged revenue growing about 33% over the past three years to $928 million in fiscal 2022. We consider MADS debt service coverage as very strong, ranging between 5.17x and 6.98x from fiscals 2020 to 2022. An additional bonds test (ABT) is at 2.5x MADS based on historic revenue is required | ||||||||||||
| Measure R 3rd lien | AA/Stable | 927,500 | 32.5% | 3.2 | 1.50 | |||||||
| Los Angeles County Metropolitan Transportation Authority’s junior subordinate-lien Measure R sales tax revenue bonds are secured by Measure R sales taxes that are collected at a rate of 0.5% on retail sales throughout Los Angeles County. The credit has very strong economic fundamentals, supported by Los Angeles County's very strong, large, broad, and diverse economy given its role as a major economic hub of regional and national importance, with more than 10 million residents. Revenue volatility is low, with pledged revenue growing about 33% over the past three years to $928 million in fiscal 2022. We consider debt service coverage as very strong, ranging between 2.48x and 3.18x from fiscals 2020 to 2022. There is an internal debt policy restricting borrowing to a level that would produce no less than 1.8x aggregate annual DSC, which somewhat offsets its 1.5x MADS Additional Bond Test (ABT). | ||||||||||||
| Prop C 1st lien | AAA/Stable | 873,000 | 19.7% | 5.5 | 1.30 | |||||||
| Los Angeles County Metropolitan Transportation Authority sales tax revenue bonds are secured by a gross first-lien pledge of Prop C sales tax revenue, less costs of collection, and 20% allocated to local governments, secures the bonds. The Prop C sales taxes consist of a 0.5% sales tax collected on retail sales throughout Los Angeles County. The credit has very strong economic fundamentals, supported by Los Angeles County's very strong, large, broad, and diverse economy given its role as a major economic hub of regional and national importance, with more than 10 million residents. We assess the revenue volatility as low, and expect the sales tax collection will remain relatively stable across different economic cycles. The authority’s fiscal 2022 pledge revenues totaled $873 million, producing MADS at 4.6x, which we consider very strong. In addition to an ABT of 1.3x MADS coverage from historical pledged revenue, on all parity debt, including proposed bonds, the authority’s debt policy restricts debt issuance to an amount that would translate to DSC that is no lower than 2.28x from budgeted revenue. Although not as strong as an ABT based on historical revenue and future MADS, this policy and LACMTA's historical adherence to it inform our expectation that coverage will remain very strong. | ||||||||||||
| Madera County Transportation Authority | AA-/Stable | 15,724 | 49.3% | 6.9 | 1.50 | |||||||
| A gross first lien pledge of Measure T sales tax revenue, net of an administrative fee paid to the California Department of Tax and Fee Administration (CDTFA), secures the bonds. Measure T is a 0.5% sales and use tax charged on transactions and services within Madera County. We assess Madera County's economy as weak, with per capita income levels well below the state and national levels. Revenue volatility, in our view, is moderate-to-low, somewhat more volatile than our view of other sales and use taxes nationally given historical pledged revenue volatility. Pledged revenues grew 22% in fiscal 2022. Debt service coverage on the bonds over the last three years ranged from 4.6x to 6.9x, levels we consider very strong. Although the additional bonds test (ABT) for the Measure T lien requires 1.5x MADS coverage based on historical pledged revenues (12 consecutive of the preceding 18 months), we believe the strength of current coverage metrics, coupled with a lack of additional borrowing plans, will enable the authority's pledged revenues to continue to produce debt service coverage at levels we consider very strong on a going-forward basis, above 4x. | ||||||||||||
| Metropolitan Atlanta Rapid Transit Authority | AAA/Stable | 698,100 | 25.0% | 5.0 | 2.00 | |||||||
| The Metropolitan Atlanta Rapid Transit Authority's are secured by 1.0% sales-and-use tax and title ad valorem taxes (TAVT) on motor vehicles collected in Fulton, DeKalb, and Clayton counties and from a 0.5% sales tax collected in the City of Atlanta. The credit is supported by very strong economic fundamentals, reflecting a broad and diverse local economy, supported by the healthy and expanding large Atlanta metropolitan statistical area. The revenue volatility is low, in our opinion, and pledged revenue have grown around 25% over the last three audited years. We calculate that MADs coverage was very strong over the last three years, ranging from 3.97x to 4.97x. The senior-lien ABT requires at least 2x MADS on all debt outstanding and proposed debt. Although MARTA's capital plan includes an estimated $2.6 billion in additional issuances in fiscal years 2024 through 2032, we believe the cushion provided by current coverage metrics, the resilience demonstrated over time by the pledged sales tax revenue, and board restrictions on additional issuance will continue to support very strong coverage above the 2.0x ABT. | ||||||||||||
| New Orleans Regional Transit Authority | A+, Positive | 51,313 | 54.9% | 6.4 | 1.50 | |||||||
| The New Orleans Regional Transit Authority’s bonds are secured by revenue from a dedicated 0.5% parish wide sales and use tax, which the electorate authorized on Jan. 19, 1985. The credit is supported by strong-to-very strong economic fundamentals, stemming from a deep and diverse economy that serves as a vibrant economic engine for the state. We consider pledged revenues as having low historical volatility despite transitory declines due to the effects of the pandemic followed by a swift recovery. Pledged revenues increased 23.4% in fiscal 2022 to $51.3 million, up from $41.6 million in fiscal 2021. We view MADS debt service coverage as very strong, ranging between 4.11x and 6.36x from fiscals 2020 to 2022. Legal provisions include an ABT that requires pledged sales tax revenue to provide 1.5x MADS coverage based on any consecutive 12-month period out of the previous 18 months of pledged revenue collections. Additional security is provided by a debt service reserve funded at 50% of MADS. The positive outlook reflects our view that we could raise the rating within the next two years if we believe recovered pledged revenues will remain stable, supporting strong coverage and liquidity on a sustained basis. | ||||||||||||
| Orange County Local Transportation Authority | AA+/Stable | 335,561 | 34.1% | 6.1 | 1.30 | |||||||
| OCLTA’s sales tax bonds are secured by Measure M2 sales tax receipts which consist of the authority's share of a 0.5% retail transactions and use tax, after deductions for state and OCLTA administrative fees, a 2% set-aside for water quality projects, and transfer of 18% of the residual revenues to cities and to Orange County for street and pedestrian safety projects (meaning OCLTA receives the remaining 82% of the residual revenues after administrative fees, the water quality projects set-aside, and transfer to Orange County cities). We consider OCLTA's economic base very strong given Orange County’s high wealth and income levels. Pledged revenue volatility is low, in our opinion, with pledged revenues growing 34% over the last three fiscal years and providing MADS coverage of 6.1x. Prior to fiscal 2022, MADS coverage ranged from 4.5x to 4.9x from 2018 to 2021. Bond provisions include a 1.3x MADS ABT for both the senior and subordinate lien pledges. We expect MADS coverage to be maintained well above the ABT given the lack of additional near-term debt issuance plans. The authority lacks an internal DSC policy beyond the ABT. | ||||||||||||
| Pima County Regional Transportation Authority | AA+/Stable | 110,676 | 23.6% | 3.7 | 2.00 | |||||||
| The Pima County Regional Transportation Authority's revenue bonds are secured by a transportation excise tax levied within Pima County at 10% of the base state sales tax rate. Per the Pima County Excise Tax Act of 2006, pledged revenues expire on June 30, 2026, which is when the Authority's bonds are set to fully mature. The credit's very strong economic fundamentals are supported by the county's location within the Tucson MSA, which we view as broad and diverse. Revenue volatility, in our view, is low, with pledged revenues growing 13.1% and 9.3% in 2021 and 2022, respectively. We calculate that MADS coverage was very strong over the last 3 years, ranging from 3.0x to 3.7x. The ABT requires historical tax revenues for any 12 consecutive months within the previous 18 months to equal at least 2x senior lien MADS and 1.2x the combined subordinated and senior lien MADS, accounting for changes in tax rates, additional revenue pledges and capital appreciation bond debt service. There is currently no subordinated debt outstanding. | ||||||||||||
| Regional Public Transportation Authority | AA+/Stable | 221,388 | 35.4% | 9.5 | 2.00 | |||||||
| The Regional Public Transportation Authority bonds are secured by a first-lien pledge of dedicated excise (sales) tax revenue collected within Maricopa County. The county levies the tax at an effective rate of approximately 3.33% of state tax rate that was in effect as of Jan. 1 ,1990. Voters authorized the tax for a 20-year period expiring Dec. 31, 2025. The bonds mature in 2025, prior to the tax's current sunset date. The credit is supported by a very strong economic fundamentals, with growing population. The revenue volatility is low, in our opinion, and pledged revenue have grown nearly 35% over the last three audited years. We calculate MADs coverage was very strong over the last three years, ranging from 7.16x to 9.47x, well above the 2.0x ABT. We expect MADs coverage will remain very strong in the near-term given that the pledged tax's current expiration date of Dec. 31, 2025, limits the current time horizon for RPTA to amortize a significant amount of new debt, and we understand it has no current plans to issue additional bonds. The tax could be extended and additional bonds potentially issued, although any extension would be subject to voter approval. | ||||||||||||
| Regional Transportation District | ||||||||||||
| 1st lien of 0.4% | AAA/Stable | 855,146 | 35.2% | 4.2 | 2.00 | |||||||
| The Regional Transportation District's (RTD) Fastrack bonds are secured by a first lien on a 0.4% sales tax, along with a junior lien on the 0.6% sales tax, both levied within RTD's boundaries. The credit is supported by very strong economic fundamentals, which benefits from a broad and diverse area that includes more than half of the state's population (over 3.1 million people), with income levels above the U.S. average. The revenue volatility is low, in our opinion, and pledged revenues have grown nearly 35% over the last three audited years. We calculate that MADs coverage was very strong over the last three years, ranging from 3.55x to 4.25x. Bond provisions include an ABT requiring that pledged revenue collected in 12 consecutive months of the preceding 18 months produce MADS coverage of at least 2x on existing and proposed additional parity bonds. We expect RTD will maintain (MADS) coverage well above very strong levels, supported by a large and resilient sales tax base and limited ability to issue additional sales tax debt on current authorizations. | ||||||||||||
| 1st lien of 0.6% | AAA/Stable | 513,088 | 35.2% | 53.5 | Closed | |||||||
| The Regional Transportation District's (RTD) senior bonds are secured by first lien pledge of a 0.6% sales levied within RTD's boundaries. The credit is supported by very strong economic fundamentals, which benefits from a broad and diverse area that includes more than half of the state's population (over 3.1 million people), with income levels above the U.S. average. The revenue volatility is low, in our opinion, and pledged revenues have grown nearly 35% over the last three audited years. We calculate that MADs was very strong over the last three years, ranging from 27.11x to 53.51x. RTD has closed this first lien to further issuance, and the bonds reach final maturity in 2024. Given the strong revenue performance and the closed lien, we anticipate the credit will maintain extraordinarily strong coverage. | ||||||||||||
| Roaring Fork Transportation Authority | AA/Stable | 19,983 | 42.3% | 7.3 | 1.50 | |||||||
| The Roaring Fork Transportation Authority's(RFTA) sales tax revenue bonds are secured by gross first-lien pledge of revenue from the sales and use taxes levied by RFTA in its member communities. RFTA is authorized by its electorate to levy a 2.0% sales and use tax in its territory, in perpetuity. Currently, levies across the six member communities, unincorporated Pitkin County, and certain portions of unincorporated Eagle County, range from 0.4% to 1.0%. We consider the economic fundamentals to be adequate-to-strong as the economic base exposed seasonality and cyclicality, due to its tourism-driven economy. The revenue volatility is low, in our opinion, and pledged revenues have grown nearly 25% over the last three audited years producing very strong MADS coverage, ranging from 5.14x to 6.49x. The senior-lien ABT requires historical tax revenues for 12 consecutive months out of the previous 18 months to equal to 1.5x MADS on debt outstanding and proposed debt. Given the stable revenue growth, we anticipate the credit will maintain coverage at levels we consider very strong. | ||||||||||||
| Sacramento Transportation Authority | AAA/Stable | 172,916 | 31.4% | 4.8 | 2.00 | |||||||
| Sacramento Transportation Authority’s sales tax revenue bonds are secured by Measure A sales tax revenues net of an administrative fee paid to the California Department of Tax and Fee Administration. Measure A is a half-cent sales and use tax charged on transactions and services within Sacramento County. County voters approved the tax in 2004, tax collections began April 1, 2009, and the tax sunsets March 31, 2039, following final maturity on the bonds. We assess the Sacramento County’s economic profile as very strong due to its location within the Sacramento-Roseville-Arden-Arcade MSA, which we consider broad and diverse. We consider revenue volatility to be low as pledged revenue has remained relatively stable through the pandemic, declining only 0.1% in fiscal 2020, then growing by 16.7% in fiscal 2021 and 12.6% in fiscal 2022 to a record $172.9 million. STA has historically maintained very strong MADS coverage well above the 2.0x ABT, with coverage ranging from 3.65x to 4.26x in fiscal years 2019 through 2021 and improving to 4.81x in fiscal 2022. We expect MADS coverage to remain extraordinarily strong (above 4x) given the authority's lack of additional debt plans and an authorizing ordinance that limits capital expenditures, including debt service, to 20.75% of pledged revenue, resulting in minimum annual coverage of 4.81x. | ||||||||||||
| San Bernardino County Transportation Authority | AAA/Stable | 252,228 | 40.9% | 18.8 | 2.00 | |||||||
| A gross first-lien pledge of Measure I sales tax revenue, net of an administrative fee paid to the California Department of Tax and Fee Administration (CDTFA), secures the bonds. Measure I is a half-cent, sales-and-use tax charged on transactions and services within San Bernardino County. San Bernardino County's strong to very strong economic fundamentals, with a large population of 2.2 million and location within the broad and diverse Riverside-San Bernardino-Ontario MSA. The authority ended fiscal 2022 with pledge revenues totaled at $252.2 million, representing an increase of 24% in past three fiscal years. The fiscal 2022 pledge revenues produced extremely strong MADS coverage of 18.7x. The authority's ABT requires Measure I revenue collected within 12 consecutive of the past 18 months to produce no less than 2.0x MADS coverage on existing and proposed bonds. The authority's sales tax revenue bonds do not benefit from the additional security of funded debt service reserves. However, given our view that coverage is very strong and revenue volatility is moderate to low, we do not apply a liquidity factor adjustment. | ||||||||||||
| Santa Clara Valley Transportation Authority | ||||||||||||
| 1st lien 0.5% 1976 | AAA/Stable | 258,474 | 23.2% | 12.4 | 2.00 | |||||||
| Santa Clara Valley Transportation Authority’s senior-lien 1976 sales tax revenue bonds are secured by a gross pledge of 5% sales tax revenues collected in Santa Clara County from a tax that was approved by voters in 1976 and does not expire. The credit is supported by very strong economic fundamentals, benefiting from its status as a major hub for high-paying jobs in technology and related industries and its location within a broad and diverse San Jose-Sunnyvale-Santa Clara metropolitan statistical area (MSA) along with very high income levels and large population. We consider the revenue volatility low. Pledged revenues increased 23% to $258.5 million in fiscal 2022 from $209.8 million in fiscal 2022. As a result of the increasing pledged revenues, MADS debt service coverage was very strong at exceptional levels from fiscals 2020 to 2022, improving steadily from 10x to 12.4x. Additional bonds test (ABT) requires collections in 12 consecutive months of the past 18 produce MADS coverage no lower than 2x on existing and proposed bonds. VTA uses its 1976 sales tax as a primary funding stream to support its operations with no additional debt expected on this lien. Given the pledged revenue growth and no additional debt needs, we anticipate the credit will continue to maintain its very strong coverage. | ||||||||||||
| 1st lien 0.5% Measure A | AAA/Stable | 258,470 | 23.1% | 3.6 | 2.00 | |||||||
| Santa Clara Valley Transportation Authority’s Measure A sales tax revenue are secured by net of an administrative fee paid to the California Department of Tax and Fee Administration (CDTFA). The Measure A sales tax is a 0.5% sales tax levied by VTA and imposed throughout Santa Clara County. Sunsets in 2036, when the bonds mature. The credit is supported by very strong economic fundamentals, benefiting from its status as a major hub for high-paying jobs in technology and related industries and its location within a broad and diverse San Jose-Sunnyvale-Santa Clara metropolitan statistical area (MSA) along with very high income levels and large population. We consider the revenue volatility low. Pledged revenues increased 23% to $258.5 million in fiscal 2022 from $209.8 million in fiscal 2022. As a result of the increasing pledged revenues, MADS debt service coverage was very strong from fiscals 2020 to 2022, improving steadily from 2.9x to 3.6x. Additional bonds test (ABT) requires collections in 12 consecutive months of the past 18 produce MADS coverage no lower than 1.3x on existing and proposed bonds. VTA has a longstanding internal target not to bond below the 2x threshold that triggers the springing DSR on the Measure A lien. Given the pledged revenue growth, we anticipate the credit will continue to maintain its very strong coverage. | ||||||||||||
| Santa Cruz Metropolitan Transit District | AA/Stable | 27,902 | 29.3% | 6.7 | 2.00 | |||||||
| A gross first-lien pledge of Measure G sales tax revenue, net of an administrative fee paid to the California Department of Tax and Fee Administration (CDTFA), secures the bonds. Measure G is a half-cent, sales-and-use tax charged on transactions and services within Santa Cruz County. We consider the Santa Crux County’s economic fundamentals as strong, with income and wealth levels well above state and national levels. The revenue volatility is low, in our opinion, and pledged revenue have grown by 12.3% and 15.1%, respectively in fiscal 2022 and 2021. The pledge revenues of $27.9 million at fiscal-year-end 2022 continue to provide very strong MADS coverage at 6.7x. The authority's ABT requires Measure G revenue collected within 12 consecutive of the past 18 months to produce no less than 2.0x MADS coverage on existing and proposed bonds. The authority's sales tax revenue bonds do not benefit from the additional security of funded debt service reserves. | ||||||||||||
| San Diego Association of Governments | ||||||||||||
| 1st lien | AAA/Stable | 405,921 | 32.7% | 3.8 | 2.00 | |||||||
| Gross revenue from a 0.5% sales tax levied throughout San Diego County, net of an administrative fee paid to the California Department of Tax and Fee Administration, secures each long-term obligation, with three lien positions: senior, junior, and junior subordinate. Based on the post-refunding, post-tender, projected debt service schedule, pledged TransNet revenue produced 3.85x MADS coverage on the senior-lien bonds in fiscal 2022. The commission's senior-lien ABT requires that pledged revenue collected during the most recent audited fiscal year produce MADS coverage of at least 2.0x on existing and proposed parity debt. Senior-lien bonds do not benefit from the additional security of funded DSRs (aside from the series 2008 bonds, which will be refunded with the series 2023 bonds). However, however this is offset by very strong coverage and the low revenue volatility. | ||||||||||||
| 2nd lien | AA/Stable | 405,921 | 32.7% | 3.2 | 1.50 | |||||||
| Gross revenue from a 0.5% sales tax levied throughout San Diego County, net of an administrative fee paid to the California Department of Tax and Fee Administration, secures each long-term obligation, with three lien positions: senior, junior, and junior subordinate. We consider the commission's second-lien coverage and liquidity strong. Pledged revenue covered pro forma MADS by 3.2x in fiscal 2022 - in a year where pledged revenue grew 21.5% to $405.9 million - and has covered pro forma MADS at no less than 1.7x looking back to fiscal 2011. The second-lien ABT requires that pledged revenue collected during the most recent audited fiscal year produced 1.5x MADS coverage on existing and proposed parity and senior debt. The second-lien obligations do not benefit from the additional security of funded DSRs however this is offset by strong coverage and the low revenue volatility. | ||||||||||||
| 3rd lien | A+/Stable | 405,921 | 32.7% | 2.3 | 1.15 | |||||||
| Gross revenue from a 0.5% sales tax levied throughout San Diego County, net of an administrative fee paid to the California Department of Tax and Fee Administration, secures each long-term obligation, with three lien positions: senior, junior, and junior subordinate. Repayment of the junior subordinate-lien obligations is subordinate to the senior- and subordinate-lien obligations, the commission's CP obligations and revolving notes, and to credit and liquidity provider fees and expenses and swap termination payments. Fiscal 2022 pledged revenue produced 2.3x MADS coverage at the three lien positions combined. While current coverage of MADS is very strong, it could decline to levels that we consider adequate under provisions of the ABT. The junior subordinate-lien loan agreement dictates that the commission must fund a DSR, but only if annual DSC on the third lien falls to less than 1.35x, in which case the reserve must be funded at 50% of MADS requirements. We view the weak 1.15x ABT and lack of a funded reserve as somewhat mitigated by the strength of current MADS coverage on the lien and its ability to maintain materially stronger coverage than 1.15x. | ||||||||||||
| San Francisco Bay Area Rapid Transit District (BART) | AA+/Negative | 310,706 | 16.4% | 5.2 | 1.50 | |||||||
| San Francisco Bay Area Rapid Transit District (BART) bonds are secured by 75% of revenue from a 0.5-cent sales tax collected within the district (the remaining 25% is distributed to the Metropolitan Transportation Commission) that doesn't expire and which covers a three-county service area: San Francisco, Contra Costa, and Alameda, with a combined population of approximately 3.7 million. BART's sales tax revenues have performed well, increasing at a strong rate over an extended period, and grew by an annual average of 4.7% in fiscal years 2013-2022. with taxable transactions not heavily concentrated within a single category. Fiscal 2022 collections, the district's pledged revenue of $310.7 million, provides very strong 5.2x MADS coverage and we anticipate similar very strong coverage in 2023. In our analysis of the district as an operating entity, we consider its creditworthiness as pressured due to materially depressed ridership activity and fare revenues, resulting in structural imbalance in its operating fund when excluding federal aid. The negative outlook indicates that we believe there is at least a one-in-three likelihood we could lower the rating over the next 12-24 months if BART's underlying credit fundamentals and general operating pledge weaken, given the sales tax rating is constrained at three notches above BART's general creditworthiness. | ||||||||||||
| San Francisco County Transportation Authority | AA+/Stable | 104,818 | 5.6% | 4.9 | 1.75 | |||||||
| The San Francisco County Transportation Authority's senior lien bonds are secured by pledge of a 0.5% sales and use tax levied on sales and use transactions within San Francisco County. The credit is supported by very strong economic fundamentals driven by income levels amongst the nation's highest and its location within a broad and diverse metropolitan statistical area. The revenue volatility is low, in our opinion, and pledged revenue increased around 6% from fiscals 2020 to 2022. We calculate MADS coverage at very strong levels, ranging from 4.06x to 4.87x from fiscals 2020 to 2022. The senior-lien ABT requires historical tax revenues for any 12 consecutive months in the previous 18 months to equal at least 1.75x MADS on all debt outstanding and proposed debt. Given the stable revenue performance, we anticipate the credit will maintain very strong coverage in the near term, absent any recessionary pressure. | ||||||||||||
| San Joaquin County Transportation Authority | AA/Stable | 86,737 | 32.6% | 3.4 | 1.50 | |||||||
| A senior lien pledge of Measure K sales tax revenues secures the bonds. The Measure K sales tax is a half-cent sales tax levied within San Joaquin County. Despite strong growth in pledged sales tax revenues over the last five fiscal years, we consider revenue volatility moderate-to-low based on the longer-term revenue history, which indicate Measure K sales tax collections have experienced somewhat greater volatility than sales tax collections nationally over the last 10 years. We assess the economic profile of San Joaquin County as adequate-to-strong, tempered by below average income and above average unemployment levels. However, we note that the local economy benefits from its proximity to the San Francisco Bay Area regional economy that offers employment opportunities within the Bay Area. Pledged revenue recovery in the last three fiscal years caused the authority's Measure K sales tax collections to increase to $86.7 million in fiscal 2022, an increase of 32.6% relative to fiscal 2020 levels. Fiscal 2022 pledged revenues provided 4.2x annual debt service coverage (DSC) on the authority's outstanding bonds, and 3.4x MADS coverage, levels we consider very strong. Bond provisions include a 1.5x MADS ABT; however, we note that the authority maintains a debt management policy that includes a 2.85x annual coverage provision for sales tax bonds. We view positively the authority's policy and its track record of consistently producing DSC exceeding the 2.85x coverage provision. | ||||||||||||
| San Mateo County Transit District | AAA/Stable | 120,785 | 31.7% | 6.3 | Closed | |||||||
| San Mateo County Transit District’s outstanding limited tax bonds are secured by a gross first lien pledge of the district's half-cent sales tax. The credit has very strong economic fundamentals, benefiting from the tax base's high income levels and its location within the broad and diverse San Francisco-Oakland-Berkeley MSA. Revenue volatility is low, with pledged revenue growing about 32% over the past three years to $121 million in fiscal 2022. We have calculated very strong debt service coverage in each of the last 3 years, ranging from 4.7x to 6.3x. The lien is legally closed, subsequent to the issuance of the 2015 Series Bonds, meaning the Indenture prohibits additional parity bond issuance notwithstanding issuance for refunding purposes. The credit benefits from very strong tax base economic fundamentals, a closed lien, and the strength of current MADS coverage, which reduce the possibility that MADS coverage would fall below 2.0x, all of which support the current AAA rating. | ||||||||||||
| San Mateo County Transportation Authority | AA+/Stable | 169,024 | 24.5% | 14.2 | 1.50 | |||||||
| San Mateo Transportation Authority's outstanding bonds are secured by a gross first lien pledge of the district's approved half-cent sales tax. The tax measure, voter-approved in 1974 and collected since 1982, continues in perpetuity, with no renewal or extension required. On July 1, 2019, a Measure W sales tax was added, bringing in approximately $40 million annually to support transit operations and the authority's capital program. The credit is characterized by the very strong service area economic fundamentals in the San Francisco-Oakland-Berkeley MSA, which is broad and diverse as well as a major economic hub of national and international significance. Revenue volatility of the pledged revenue stream is low, in our opinion, consistent with our view of sales and use taxes nationally. Pledged revenues from combined Measure A and Measure W revenues increased 20.3% in fiscal 2022 and has grown by an average of nearly 12% over the last three audited fiscal years. We assess MADS debt service coverage as strong over the last three years, ranging from 9x to 15x, however, we base our rating on the adequate 1.5x ABT as baseline for coverage given the potential for additional leverage on the pledged revenue stream. Given the strength of current MADS coverage, we believe it is unlikely that coverage would fall close to the ABT threshold of 1.5x. Pursuant to the 2015 indenture, the senior lien is legally closed, however there is an open subordinate lien on the same pledged revenue stream which could suppress coverage on both the senior and subordinate lien bonds if additional debt were issued. | ||||||||||||
| Snohomish Cnty Pub Transp Benefit Area Corp | AAA/Stable | 199,664 | 27.9% | 139.3 | 2.50 | |||||||
| The Snohomish County Public Transportation Benefit Area Corp. sales tax revenue bonds are secured by a 1.2% sales and use tax levied throughout the county. The comparatively large and wealthy Seattle MSA anchors the economic base, which we view as very strong. Revenue volatility is generally low, although pledged revenues grew a strong 20% in 2021 and another 6.5% in 2022. We anticipate revenue growth will be more moderated in the near-term given the expectations for slower economic growth over the next year. Snohomish's MADS coverage in 2022 was extraordinarily strong, in our view, and was greater than 100x from fiscal 2020 through 2022. The ABT requires historical tax revenues for any 12 consecutive months in the previous 24 months to equal at least 2.5x MADS on debt outstanding and proposed debt which we believe limits potential future coverage dilution. | ||||||||||||
| Sonoma County Transportation Authority | AA/Stable | 31,849 | 25.5% | 3.5 | 1.25 | |||||||
| The Sonoma County Transport Authority's are secured by a gross first lien pledge of Measure M sales tax revenue, net of an administrative fee paid to the California Department of Tax and Fee Administration (CDTFA), secures the bonds. The credit is supported by very strong economic fundamentals driven by high income levels and a broad and diverse MSA. The revenue volatility is moderate to low, in our opinion as the tax base is strongly influenced by tourism and agricultural industries. Pledged revenue increased around 25% over the last three audited years, with MADS coverage ranging from 2.2x to 2.9x from fiscals 2020 to 2022. The senior-lien ABT requires projected tax revenues for 12 consecutive months to equal at least 1.25x MADS on all debt outstanding and proposed debt. Given the stable revenue performance, we anticipate the credit will maintain strong coverage in the near term, absent any recessionary pressure. | ||||||||||||
| Sonoma Marin Area Rail Transit District | AA/Stable | 49,075 | 25.9% | 2.9 | 1.50 | |||||||
| Sonoma Marin Area Rail Transit District’s (SMART) Measure Q sales tax revenue are secured by net of an administrative fee paid to the California Department of Tax and Fee Administration (CDTFA). Measure Q is a 0.25% sales tax charged on transactions within Sonoma and Marin counties. The credit is supported by very strong economic fundamentals including SMART's two-county (Sonoma and Marin) district that spans two broad and diverse metropolitan statistical areas benefiting from tourism activity. Local economic drivers include tourism and agriculture. We consider the revenue volatility as low. Notably, pledged revenues increased 26% to $49.1 million in fiscal 2022 from $39.0 million in fiscal 2020. MADS coverage is very strong at 2.9x in fiscal 2022, up from 2.2x in fiscal 2020. Additional bonds test (ABT) requires that Measure Q collections in 12 consecutive months of the past 24 produce MADS coverage no lower than 1.5x on existing and proposed bonds. Given pledged the revenue growth and lack of additional borrowing plans, we anticipate the credit will continue to maintain its very strong coverage. | ||||||||||||
| Tulare County Transportation Authority | AA/Stable | 50,651 | 22.0% | 3.5 | 1.50 | |||||||
| Tulare County Transportation Authority’s revenue bonds are secured by Measure R sales tax receipts which consists of 0.5-cent sales tax passed by voters in November 2006. The tax authorization expires March 31, 2037, following final maturity on the authority's debt. We consider Tulare county's economic fundamentals to be weak-to-adequate due to its below average income and high unemployment rate compared to state and nation. Revenue volatility, in our view, is low with a 10-year compound annual growth rate of 5.8% since 2013 on the sales tax revenues. The post-COVID economic recovery improved the authority's Measure R collections to $50.7 million in fiscal 2023, up 2.7% compared to fiscal 2022 equating to 3.53x MADS coverage, which we view as very strong. Bond provisions include a 1.5x MADS ABT; however, we note that the authority maintains internal debt policy of which restricts debt service from exceeding 50% of Measure R revenues. Given this additional restriction, we believe the authority will likely maintain coverage levels that we consider very strong. | ||||||||||||
| Utah Transit Authority | ||||||||||||
| 1st lien state shared | AA+/Positive | 414,301 | 33.0% | 3.3 | 2.00 | |||||||
| The Utah Transit Authority's senior lien bonds are secured by gross sales tax revenues and available authority net revenue from all sources, except federal and state grants, after payment of authority operating expenses, as well as by debt service reserves. The credit is supported by a very large, economically diverse sales tax collection area covering approximately 80% of Utah's population. The revenue volatility is low, in our opinion, and pledged revenues have grown approximately 33% over the last three audited years. UTA has very strong coverage and liquidity reflective of historical MADS coverage well above the 2.0x ABT (3.25x for fiscal 2022). Given the strong revenue performance and minimal debt plans, we anticipate the credit will maintain very strong MADs coverage in the near term, absent any recessionary pressure. The positive outlook reflects that we could raise the rating should UTA's underlying credit fundamentals continue to improve, leading to a higher assessment of general creditworthiness. | ||||||||||||
| 2nd lien state shared | AA/Stable | 414,301 | 33.0% | 2.5 | 1.50 | |||||||
| The Utah Transit Authority's subordinate lien bonds are secured by gross sales tax revenues and available authority net revenue from all sources, except federal and state grants, after payment of authority operating expenses, as well as by debt service reserves. The credit is supported by a very large, economically diverse sales tax collection area covering approximately 80% of Utah's population. The revenue volatility is low, in our opinion, and pledged revenue have grown around 33% over the last three audited years. UTA has strong coverage and liquidity reflective of 2.52x coverage of combined senior and subordinate MADS, well above the 1.5x ABT. Given the strong revenue performance and minimal debt plans, we anticipate the credit will maintain strong MADs coverage in the near term, absent any recessionary pressure. | ||||||||||||
| VIA Metropolitan Transit Advanced Transportation District | AAA/Stable | 46,247 | 29.2% | 20.8 | 2.00 | |||||||
| The VIA Metro Transit Advanced Transportation District (ATD) bonds are secured by the ATD's share of the ATD tax, which consists of half of a 0.25% sales and use tax levied within the boundaries of the District. The rating is supported by the credit's very strong economic fundamentals, owing to its location within the broad, diverse and growing San Antonio MSA. Revenue volatility, in our view, is low, with pledged revenues growing 13.7% and 13.6% in fiscal 2021 and 2022, respectively. MADS coverage was exceptionally strong the last 3 years, ranging from 16x to 21x. The ABT requires historical tax revenues for any 12 consecutive months in the previous 18 months to be at least 2x MADS on debt outstanding and proposed debt. | ||||||||||||
| VIA Metropolitan Transit Authority | AAA/Stable | 201,408 | 27.0% | 16.0 | 2.00 | |||||||
| The VIA Metro Transit sales tax revenue bonds are secured by a 0.5% sales and use tax levied within it's service area. The rating is supported by the credit's very strong economic fundamentals, owing to its location within the broad, diverse and growing San Antonio MSA. Revenue volatility, in our view, is low, with pledged revenues growing 10% and 15.4% in fiscal 2021 and 2022, respectively. MADS coverage was very strong the last 3 years, ranging from 12.5x to 16x. The ABT requires historical tax revenues for any 12 consecutive months in the previous 18 months to be at least 2x MADS on debt outstanding and proposed debt. | ||||||||||||
| Note: Pledged revenue data reflects 2022. | ||||||||||||
Appendix 2
| Select state sales tax bonds | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Issuer | Sales tax bond rating | Most recent net pledged revenue ('000s) | Revenue growth over the last three years | MADS Coverage | Additional bonds test (x) | |||||||
| Alabama Public School & College Authority | ||||||||||||
| 1st lien | AA/Stable | 3,311,145 | 15.8% | 13.0 | None | |||||||
| The Alabama Public School & College Authority's revenue bonds are secured by a combination of sales tax, use tax, gross utility tax, and utility service tax receipts collected throughout Alabama. Its statewide tax base supports the credit's very strong economic fundamentals. Revenue volatility is low, with pledged revenues increasing between 3% and 8% over the last 3 fiscal years. We calculate debt service coverage was very strong over the last 3 years, ranging between 11.5x and 14.5x. The legal covenants lack an ABT requirement, which we view as a negative factor in our assessment of coverage and liquidity. We expect coverage will remain well above levels that we view as very strong provided a history of pledged revenue growth, low volatility, and diverse statewide taxing base. | ||||||||||||
| 2nd lien | AA/Stable | 3,311,145 | 15.8% | 13.0 | None | |||||||
| The Alabama Public School & College Authority's revenue bonds are secured by a combination of sales tax, use tax, gross utility tax, and utility service tax receipts collected throughout Alabama. We do not make a rating distinction between the senior and subordinate bonds. The state does not prioritize debt service payments based on liens given the varying months in which the authority pays debt service and, in our view, first-lien debt service is not always paid before legally subordinate debt service, depending on which month debt service is due. Its statewide tax base supports the credit's very strong economic fundamentals. Revenue volatility is low, with pledged revenues increasing between 3% and 8% over the last 3 fiscal years. We calculate debt service coverage was very strong over the last 3 years, ranging between 11.5x and 14.5x. The legal covenants lack an ABT requirement, which we view as a negative factor in our assessment of coverage and liquidity. We expect coverage to remain well above levels that we view as very strong, provided a history of pledged revenue growth, low volatility, and a diverse statewide taxing base. | ||||||||||||
| Phoenix Civic Improvement Corp., AZ | AA/Stable | 1,117,359 | 37.4% | 37.2 | None | |||||||
| The distribution revenue bonds are secured by state-shared transaction privilege, use and excise (sales) taxes, which are distributed based on a statutory funding formula. The credit is supported by very strong economic fundamentals reflecting the statewide tax base, which has recognized population growth significantly above the nation over the last decade, that we consider broad and diverse. Revenue volatility, in our view, is moderate to low with pledged revenues having grown 37.4% over the last three audited years. However, the statutory nature of the funding formula and ability of the state to change the formula through legislative change adds some uncertainty. We have calculated extraordinarily strong debt service coverage over the last three audited years, ranging from 34x to 46x. The bonds do not have any ABT provisions, but we do not expect any additional debt, given that the indenture prohibits the city from selling any parity debt secured by a first lien on the state convention center distribution payments. | ||||||||||||
| Arizona Transportation Board | AA+/Stable | 443,462 | 35.8% | 3.1 | 2.00 | |||||||
| The Arizona Transportation Board's revenue bonds are secured by 66.7% of the total excise (sales) taxes levied in Maricopa County, which is levied at 10% of the State sales tax rate. The credit is supported by very strong economic fundamentals reflecting a taxing base located within the broad, diverse and growing Phoenix MSA. Revenue volatility, in our view, is low with pledged revenues having grown 35.8% over the last three years. We have calculated very strong debt service coverage over the last three years, ranging from 2.3x to 3.1x. The senior lien ABT requires historical tax revenues for any 12 consecutive months in the prior 18 months to equal at least 2x MADS on debt outstanding and proposed debt. With the pledged revenues, pursuant to the County Excise Tax Act passed in 2004, set to expire at the end of 2025 along with the current outstanding debt, there is limited ability for the issuance of additional debt. As a result, expect very strong coverage moving forward. However, we note that a ballot measure to extend the tax will go to voters in 2024, and if approved, could provide additional room for leverage. | ||||||||||||
| Government of Guam | BB/Stable | 194,009 | 8.4% | 3.5 | 3.00 | |||||||
| The bonds are limited obligations of Guam payable solely from and secured by revenue from three percentage points' worth of the total 5% (60% of total BPT revenue) BPT levy on goods, services, and the sale of tangible property (among other inclusions) in Guam. While we believe pledged revenues will continue to be affected by slowdown in travel industry and recent hurricane damages, we expect the coverage to remain strong. The DSC is at 3.46x of MADS based on fiscal 2022 pledge revenues. We view that the bond provisions as strong with ABT at 3.0x of MADS on a historical basis. Also, the pledged BPT revenue is held in a special revenue fund of the treasury once collected and is not deposited into the general fund unless the minimum monthly deposit amounts into the bond fund are satisfied. | ||||||||||||
| Illinois | ||||||||||||
| Build Illinois Senior Sales Tax Bonds | A/Stable | 11,478,200 | 24.8% | 122.9 | 20.00 | |||||||
| Illinois senior lien sales tax bonds are secured by state's share of sales tax revenue. The credit is supported by a diverse statewide tax base with very strong economic fundamentals due to the state's large population of about 12.6 million generating the pledged sales tax. Revenue volatility is low, with pledged revenue growing about 25% over the past three years to $11.47 billion in fiscal 2022. We calculate debt service coverage was very strong over the last 3 years, ranging between 63.4x and 123x. The minimum level of coverage that the senior-lien Build Illinois bonds can be issued is 20x, which is an effective ABT. Bond provisions limit the issuance of senior parity debt so that the MADS requirement for all proposed bonds and bonds outstanding cannot exceed 5% of the state's net sales tax revenues. The senior-lien bonds have a DSR fund equal to 50% of MADS. | ||||||||||||
| Build Illinois Junior Sales Tax Bonds | A/Stable | 11,478,200 | 24.8% | 40.0 | 10.20 | |||||||
| Illinois junior lien sales tax bonds are secured by state's share of sales tax revenue. The junior-lien bonds are subordinate in the flow of funds to the senior-lien bonds outstanding, but we have assigned the same rating to bonds of both liens due to the similar credit structure, strong bond protections against dilution of coverage by additional debt, and very strong debt service coverage from the pledged sales tax revenues levied statewide. The credit is supported by a diverse statewide tax base with very strong economic fundamentals due to the state's large population of about 12.6 million generating the pledged sales tax. Revenue volatility is low, with pledged revenue growing about 25% over the past three years to $11.47 billion in fiscal 2022. We calculate debt service coverage was very strong over the last 3 years, ranging between 30x and 40x. The maximum debt service on junior cannot exceed 9.8% of the net state share of state sales tax receipts, which is an effective 10.2x ABT. | ||||||||||||
| Massachusetts School Building Authority | ||||||||||||
| 1st lien | AA+/Stable | 1,188,905 | 24.6% | 3.9 | 1.40 | |||||||
| Massachusetts School Building Authority’s 1% statewide sales tax, excluding certain sales tax revenue on meals and sales occurring in portions of Boston, Cambridge, and the Springfield Convention Center area, secures the senior bonds. The credit is supported by a diverse statewide tax base with very strong economic fundamentals due to the state's large population of about 6.9 million generating the pledged sales tax. Revenue volatility is low, in our view, with pledged revenue growing about 25% over the past three years to $1.19 billion in fiscal 2022. We calculate debt service coverage was very strong over the last 3 years, ranging between 3.15x and 3.92x. Additional bonds test (ABT) is at 1.4x MADS, however we continue to access the coverage and liquidity based on all in MADS coverage at 3.92x. Additional debt issuance is anticipated to be almost wholly on the subordinate lien. Baseline could revert to the ABT if this became the working lien. | ||||||||||||
| 2nd lien | AA/Stable | 1,188,905 | 24.6% | 2.9 | 1.30 | |||||||
| Massachusetts School Building Authority’s subordinate bond are secured by subordinate lien on the authority's dedicated sales tax revenue, after payment of senior bonds. The credit is supported by a diverse statewide tax base with very strong economic fundamentals due to the state's large population of about 6.9 million generating the pledged sales tax. Revenue volatility is low, in our view, with pledged revenue growing about 25% over the past three years to $1.19 billion in fiscal 2022. We calculate debt service coverage was very strong over the last 3 years, ranging between 2.35x and 2.93x. Additional bonds test (ABT) is at 1.3x MADS. This is the working lien, excess sales taxes are needed for state operations and pay-go capital funding, which should keep DSC above the AB. However, future debt issuance is expected to be on the subordinate lien as it was created to have a lower ABT and no debt service reserves. | ||||||||||||
| New York State DASNY Sales Tax | AA+/Stable | 8,855,154 | 166.9% | 8.6 | 2.00 | |||||||
| The New York State sales tax first lien is supported by very strong economic fundamentals including a tax base that is considered broad and diverse. Revenue volatility is low and pledged revenues have grown 167% over the last three audited fiscal years. As a result of the increase in pledged revenues, debt service coverage improved to 8.89x from 6.85x. Currents MADS coverage is 8.58x, well above the ABT (additional bonds test) of 2x. We believe that coverage will continue to get stronger given the additional one percent tax deposited to the STRBTF since fiscal year 2022. | ||||||||||||
| New York State | ||||||||||||
| 1st lien | AA+/Stable | 8,247,700 | 121.8% | 14.3 | 2.00 | |||||||
| The New York State sales tax first lien is supported by very strong economic fundamentals including a tax base that is considered broad and diverse. Revenue volatility is low and the sales tax has historically grown over the last ten years with the exception of some declines in 2009 and 2010. Pledged revenues have grown 122% over the last three audited fiscal years with fiscal 2022 pledged revenues being $8.2 billion. As a result of the increase in pledged revenues, MADS debt service coverage improved to 14.28x from 12.60x, well above the ABT (additional bonds test) of 2x. This lien will retire in 2025 and will then be pledged to other sales tax bonds. | ||||||||||||
| 3rd lien | AA+/Stable | 8,247,700 | 121.8% | 11.0 | 1.40 | |||||||
| The New York State Local Government Assistance Corporation's (LGAC) sales tax subordinated lien is supported by very strong economic fundamentals including a tax base that is considered broad and diverse. Revenue volatility is low and the sales tax has historically grown over the last ten years with some declines in 2009 and 2010. Pledged revenues have grown 122% over the last three audited fiscal years with fiscal 2022 pledged revenues being $8.2 billion. As a result of the increase in pledged revenues, MADS debt service coverage improved to 11.03x from 7.66x, well above the ABT (additional bonds test) of 1.4x. LGAC's outstanding bonds was advance refunded in 2021 and will remain outstanding until 2024. | ||||||||||||
| Northern Indiana Commuter Transportation District | AA-/Stable | 28,279 | 17.3% | 4.6 | 1.75 | |||||||
| Northern Indiana Commuter Transportation District’s bonds are secured by the commuter rail service fund consisting of a percent of the state's sales tax and the indefinite situs tax, an electric rail service fund consisting of distributable property tax receipts. In 1981, the General Assembly created the commuter rail service fund and redirected the indefinite situs tax to the NICTD from the general fund. Under Indiana Code Section 6-1.1-8-35, each year the Indiana Department of Local Government Finance (the department) is required to tax all personal property owned or used by each railroad car company. The credit is supported by a diverse statewide tax base with very strong economic fundamentals due to the state's large population of about 6.9 million generating the pledged revenues. Manufacturing, primarily automotive, continues to drive the state economy and provided a strong boost to recent employment growth. Revenue volatility is moderate, with pledged revenue growing about 17% over the past three years to $28 million in fiscal 2022. We calculate debt service coverage was very strong over the last 3 years, ranging between 3.9x and 4.6x. We assess the coverage and liquidity based on additional bond test at 1.75x annual debt service coverage, with a debt service reserve requirement funded at 50% of MADS and a provision to replenish. | ||||||||||||
| Northern Virginia Transportation Authority | AA+/Stable | 232,818 | 21.3% | 41.9 | 2.00 | |||||||
| Sales and use taxes collected within the deep and diverse regional economy of NVTA's member localities secure the transportation special tax revenue bonds. Pledged revenue has continued to grow in the last three years and cover MADS by more than 40x and we expect coverage will remain well above the additional bonds test of 2x MADS. | ||||||||||||
| Note: Pledged revenue data reflects 2022, with the exception of DASNY bonds reflecting 2023. | ||||||||||||
This report does not constitute a rating action.
| Primary Credit Analysts: | Savannah Gilmore, Englewood + 1 (303) 721 4132; savannah.gilmore2@spglobal.com |
| Kevin R Archer, San Francisco + 1 (415) 3715031; Kevin.Archer@spglobal.com | |
| Secondary Contacts: | Kenneth P Biddison, Englewood + 1 (303) 721 4321; kenneth.biddison@spglobal.com |
| Andrew Bredeson, Englewood + 1 (303) 721 4825; andrew.bredeson@spglobal.com | |
| Geoffrey E Buswick, Boston + 1 (617) 530 8311; geoffrey.buswick@spglobal.com | |
| Sussan S Corson, New York + 1 (212) 438 2014; sussan.corson@spglobal.com | |
| Kurt E Forsgren, Boston + 1 (617) 530 8308; kurt.forsgren@spglobal.com | |
| Brenea Gordon, Chicago +1 3122337048; brenea.gordon@spglobal.com | |
| Rob M Marker, Englewood + 1 (303) 721 4264; Rob.Marker@spglobal.com | |
| Ladunni M Okolo, Dallas + 1 (212) 438 1208; ladunni.okolo@spglobal.com | |
| Scott Shad, Englewood (1) 303-721-4941; scott.shad@spglobal.com | |
| Kayla Smith, Englewood + 1 (303) 721 4450; kayla.smith@spglobal.com | |
| Andrew J Stafford, New York + 212-438-1937; andrew.stafford1@spglobal.com | |
| Thomas J Zemetis, New York + 1 (212) 4381172; thomas.zemetis@spglobal.com | |
| Research Contributors: | Nisha Gujaran, CRISIL Global Analytical Center, an S&P affiliate, Mumbai |
| Vikram Sawant, CRISIL Global Analytical Center, an S&P Global Ratings affiliate, Mumbai | |
| Ritesh Bagmar, CRISIL Global Analytical Center, an S&P affiliate, Pune | |
| Romi Pandey, CRISIL Global Analytical Center, an S&P affiliate, Pune |
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