Michigan Department of Transportation
09/17/2024 | Press release | Distributed by Public on 09/17/2024 11:36
Moody’s upgrades ratings for three transportation bonds
Fast facts:
• Moody's upgraded three MDOT bond ratings that help fund transportation programs.
• The State Trunkline Fund and Comprehensive Transportation Fund bond ratings were raised from Aa2 to Aa1. Grant Anticipation Bonds (GARVEE) was increased from A2 to A1.
• The stable outlook on the State of Michigan applies to all three transportation bond programs, given the state's governance and management over the pledged revenues.
LANSING, Mich. and NEW YORK - In a positive move, Moody's Ratings (Moody's) recently upgraded three Michigan Department of Transportation (MDOT) bonds reflecting the general credit strengths of the State of Michigan and stable outlook. The upgraded bond ratings include: State Trunkline Fund (STF) bonds from Aa2 to Aa1, with approximately $2.8 billion outstanding debt; Comprehensive Transportation (CTF) bonds from Aa2 to Aa1, with approximately $23 million outstanding debt; and Grant Anticipation Bonds (GARVEEs) from A2 to A1, with approximately $443 million outstanding debt.
"These upgrades demonstrate the State of Michigan's ability and commitment to pay back bonds that will provide a bigger benefit in the future should we have to issue any bonds, which can help bring more favorable interest rates," said State Transportation Director Bradley C. Wieferich, P.E.
Used to fund state highway (I, M and US-route) construction projects, the STF bond increase reflects the general credit strengths of the State of Michigan (Aa1 stable) and the role of the state in dedicating broad transportation revenues, which include motor fuel taxes and vehicle registration fees collected in the Michigan Transportation Fund (MTF), to make bond payments. The rating recognizes pledged transportation revenue to the state's operations and lack of contingent features (e.g., annual appropriation). Debt service payment is stable and strong at roughly five times, and it will likely remain strong even with the expected issuance of remaining authorized debt under Gov. Gretchen Whitmer's Rebuilding Michigan Program. The state has bolstered highway revenue through policy changes, including raising the state gasoline tax and indexing it to inflation, which helps offset both stagnant motor fuel consumption and likely increasing debt service costs from expected new issuances.
The CTF provides funding to various public transit, intercity bus, marine, and rail programs across the state. The upgrade to Aa1 on CTF bonds also reflects the general credit strengths of the State of Michigan to make bond payments. The state deposits into the CTF certain other revenue, including sales tax collected on motor vehicle sales and state sales tax levied on motor fuels.
The upgrade to A1 on GARVEE is now three notches below the state's Aa1 issuer rating, reflecting the somewhat broad nature of the pledged revenue, which are the state's Title 23 Federal Highway Administration grants, and the potential for pledged revenue disruption or reduction related to federal reauthorization risk. Like most GARVEEs, the bond's final maturity spans multiple typical authorization periods of the federal aid highway program. The strong debt service coverage and three times additional bonds test enhance credit strength during the authorization term but do not offset the risk of disruption in federal highway aid. Payment of debt service is subject to state appropriation of pledged revenues.
The stable outlook on the State of Michigan applies to all three transportation bond programs, given the state's governance and management over the pledged revenues and the likely maintenance of strong debt service coverage for each program. The state's stable outlook incorporates governance practices, including rapid response to developing economic or fiscal downturns. Further, the state's economy, while still linked to the automobile manufacturing industry, is becoming increasingly diversified.
• Moody's upgraded three MDOT bond ratings that help fund transportation programs.
• The State Trunkline Fund and Comprehensive Transportation Fund bond ratings were raised from Aa2 to Aa1. Grant Anticipation Bonds (GARVEE) was increased from A2 to A1.
• The stable outlook on the State of Michigan applies to all three transportation bond programs, given the state's governance and management over the pledged revenues.
LANSING, Mich. and NEW YORK - In a positive move, Moody's Ratings (Moody's) recently upgraded three Michigan Department of Transportation (MDOT) bonds reflecting the general credit strengths of the State of Michigan and stable outlook. The upgraded bond ratings include: State Trunkline Fund (STF) bonds from Aa2 to Aa1, with approximately $2.8 billion outstanding debt; Comprehensive Transportation (CTF) bonds from Aa2 to Aa1, with approximately $23 million outstanding debt; and Grant Anticipation Bonds (GARVEEs) from A2 to A1, with approximately $443 million outstanding debt.
"These upgrades demonstrate the State of Michigan's ability and commitment to pay back bonds that will provide a bigger benefit in the future should we have to issue any bonds, which can help bring more favorable interest rates," said State Transportation Director Bradley C. Wieferich, P.E.
Used to fund state highway (I, M and US-route) construction projects, the STF bond increase reflects the general credit strengths of the State of Michigan (Aa1 stable) and the role of the state in dedicating broad transportation revenues, which include motor fuel taxes and vehicle registration fees collected in the Michigan Transportation Fund (MTF), to make bond payments. The rating recognizes pledged transportation revenue to the state's operations and lack of contingent features (e.g., annual appropriation). Debt service payment is stable and strong at roughly five times, and it will likely remain strong even with the expected issuance of remaining authorized debt under Gov. Gretchen Whitmer's Rebuilding Michigan Program. The state has bolstered highway revenue through policy changes, including raising the state gasoline tax and indexing it to inflation, which helps offset both stagnant motor fuel consumption and likely increasing debt service costs from expected new issuances.
The CTF provides funding to various public transit, intercity bus, marine, and rail programs across the state. The upgrade to Aa1 on CTF bonds also reflects the general credit strengths of the State of Michigan to make bond payments. The state deposits into the CTF certain other revenue, including sales tax collected on motor vehicle sales and state sales tax levied on motor fuels.
The upgrade to A1 on GARVEE is now three notches below the state's Aa1 issuer rating, reflecting the somewhat broad nature of the pledged revenue, which are the state's Title 23 Federal Highway Administration grants, and the potential for pledged revenue disruption or reduction related to federal reauthorization risk. Like most GARVEEs, the bond's final maturity spans multiple typical authorization periods of the federal aid highway program. The strong debt service coverage and three times additional bonds test enhance credit strength during the authorization term but do not offset the risk of disruption in federal highway aid. Payment of debt service is subject to state appropriation of pledged revenues.
The stable outlook on the State of Michigan applies to all three transportation bond programs, given the state's governance and management over the pledged revenues and the likely maintenance of strong debt service coverage for each program. The state's stable outlook incorporates governance practices, including rapid response to developing economic or fiscal downturns. Further, the state's economy, while still linked to the automobile manufacturing industry, is becoming increasingly diversified.