KBRA Assigns AAA, Stable Outlook to State of Wisconsin Transportation Revenue Bonds
1 Mar 2024 | New York
KBRA assigns a long-term AAA rating with a Stable Outlook to the Transportation Revenue Refunding Bonds, 2024 Series 2 to be issued by the State of Wisconsin (the State). Concurrently, KBRA affirms the long-term AAA rating with a Stable Outlook on approximately $1.5 billion of outstanding Transportation Revenue Bonds (TRBs). TRBs are secured by a first lien pledge of Program Income, including vehicle Registration Fees and Other Registration-Related fees.
Key Credit Considerations
The rating actions reflect the following key credit considerations:
Credit Positives
- Steady growth in pledged revenues, aided by proactive legislative rate adjustments, enables strong MADS coverage.
- Strong legal framework, including strong additional bonds test for TRB’s (2.25x), and covenant to charge sufficient vehicle registration fees and registration-related fees to pay debt service.
- The essential nature of pledged revenues (Program Income), which consist largely of motor vehicle registration and related fees that are imposed and collected statewide.
Credit Challenges
- Vehicle registration fees may be sensitive to broader economic trends, though any potential declines are unlikely to impact the rating given strong coverage levels and the State’s history of adjusting fees.
The Stable Outlook reflects KBRA's expectations that Program Income will continue to provide strong coverage of TRB debt service, and that the State will continue its long-standing practice of monitoring and adjusting transaction fees, when necessary.
Rating Sensitivities
For Upgrade
- Not applicable at AAA rating level.
For Downgrade
- A sustained decline in Program Income. The State’s proactivity in maintaining rates to ensure consistent funding of debt service helps to mitigate this risk. While unlikely, the overleveraging of pledged revenues leading to a significant decline in maximum annual debt service coverage.
To access rating and relevant documents, click here.