BUSINESSWIRE.COM
NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned an 'AA-' rating to $152 Oklahoma Capitol
Improvement Authority (OCIA) state highway capital improvement revenue
bonds series 2009A and 2009B (federally taxable - interest subsidy -
Build America Bonds). The bonds are expected to sell through negotiation
Sept. 1, 2009 and are due July 1, 2010-2024. The Rating Outlook is
Stable.
The rating reflects the payment of lease rentals by the State Department
of Transportation from state revenues, specifically from the Rebuilding
Oklahoma Access and Driver Safety Fund, subject to annual appropriation.
The Department of Transportation covenants to include a budget request
for lease payments sufficient to pay debt service for this program. OCIA
is one of the principal financing agencies of the state as the use of
general obligation (GO) bonds is limited. The term of the lease extends
through the life of the bonds; lease payments are not abatable. In the
aggregate, the state's GO and lease debt service expense is a low 2.8%
of fiscal 2010 appropriations. Including the current offering, net tax
supported debt totals $1.7 billion, equal to 1.3% of 2008 personal
income.
The state's 'AA' GO bond rating and Stable Outlook reflect low debt
levels, disciplined financial policies, including an appropriation limit
of 95% of certified general fund revenues, close monitoring of revenue
results, and a constitutional budget reserve funded at $596 million or
10% of expenditures. The state has continued to demonstrate a
willingness and ability to address fiscal challenges which now include
revenue underperformance. Tax revenues are constrained both by an
economic base with below-average wealth levels and a supermajority
requirement of the legislature or voter referendum to raise taxes.
Financial operations are conservative. The budget reserve has been fully
funded since fiscal 2001, and the state maintains a separate cash flow
reserve. Fiscal 2009 general fund revenues were constrained by the
weakened economy. Originally projected to rise 3.2% from the prior year,
actual revenues came in approximately $428 million less than expected
and $435 million below the prior year. While the state's largest revenue
source, income tax, fell 9.5% year over year, sales tax revenues, the
second largest source, actually increased 2.2% year over year.
Nevertheless, the 7.3% shortfall exceeded the state's 5% cushion and
cuts of 1.5% were instituted. The fiscal 2010 budget includes use of
$641 million in federal stimulus monies and does not use reserve funds.
Personal income taxes are projected to decline 2.6% from fiscal 2009
revised receipts with a 1.6% gain projected for sales tax collections.
Gas production taxes are projected to drop 29% with oil production tax
revenues forecasted at zero.
The state's economy is diversifying, although oil and natural gas
production and military installations remain important. The state
continued to grow while the nation as a whole entered the recession, but
Oklahoma began to contract as well in 2009. June 2009 employment was
down 2% year over year, much lower than the 4.2% U.S. drop, but a sharp
reversal from the 1.7% growth in state employment of 2008. Unemployment
is rising but remains comparably low at 6.3% as of June 2009, versus the
national rate of 9.5%. Personal income growth was strong into early
2009, rising 3.2% in the state during the first quarter of 2009,
compared to 0.8% growth for the U.S.
Fitch's rating definitions and the terms of use of such ratings are
available on the agency's public site, 'www.fitchratings.com'.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality, conflicts
of interest, affiliate firewall, compliance and other relevant policies
and procedures are also available from the 'Code of Conduct' section of
this site.
Posted on
Thu, August 13, 2009
by Crystal Drwenski