KBRA Assigns AAA Rating to Various Massachusetts Commonwealth Transportation Fund Revenue Bonds; Affirms Rating on Outstanding Bonds; Outlook is Stable
31 Aug 2023 | New York
KBRA assigns a long-term rating of AAA with a Stable Outlook to the following Commonwealth of Massachusetts bonds:
- Commonwealth Transportation Fund Revenue Bonds (Rail Enhancement Program), 2023 Series A (Sustainability Bonds)
- Commonwealth Transportation Fund Revenue Bonds (Rail Enhancement Program), 2023 Series B
KBRA additionally affirms the long-term rating of AAA with a Stable Outlook for the Commonwealth’s outstanding Commonwealth Transportation Fund Revenue Bonds.
The long-term rating on the Commonwealth of Massachusetts’ (the “Commonwealth’s”) Transportation Fund Revenue Bonds (“CTF Revenue Bonds”) reflects the broad and resilient nature of the pledged revenues, ample projected coverage of maximum annual debt service requirements, and the extensive legal protections that are collectively and effectively designed to insulate pledged revenues from Commonwealth budget operations. The rating is further supported by the breadth of the taxing base (state-wide), strong underlying socioeconomic metrics, and the relative affordability of pledged taxes when compared to other New England states.
CTF Revenue Bonds are special limited obligations of the Commonwealth, payable solely from the Pledged Funds, which primarily consist of six (6) Motor Fuels Tax revenues and various License and Registration Fees collected throughout the Commonwealth. Proceeds from the sale of the 2023 Series B CTF Bonds will be used to fund costs of certain transportation projects of the Commonwealth, on parity with approximately $3.44 billion of outstanding parity CTF Bonds as of June 30, 2023.
Key Credit Considerations
The rating actions reflect the following key credit considerations:
- Very broad and resilient nature of the pledged revenues generate more than 4x coverage of maximum annual debt service requirements for all CTF bonds issued to date.
- Extensive legal protections that are collectively and effectively designed to insulate pledged revenues from Commonwealth budget operations.
- The Commonwealth’s diverse, wealthy, and growing economy.
- The motor fuels portion of pledged revenues (~53.8% of FY23 pledged revenues) is economically sensitive and likely to decrease in a recession, as it has during the pandemic-induced downturn.
- Not applicable at AAA rating level
- An unlikely scenario where there was a substantial and sustained decline in pledged revenues.
To access rating and relevant documents, click here.