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Fitch gives Pennsylvania Turnpike Commission strong rating

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Fitch Ratings recently assigned an A+ rating to the Pennsylvania Turnpike Commission's $514 million variable rate turnpike revenue bonds.

In addition, Fitch affirmed the turnpike's $3.5 billion outstanding senior lien turnpike revenue bonds at A+ and $3.8 billion outstanding subordinate lien turnpike revenue bonds at A-.

The rating outlook on all bonds is stable. The PTC is issuing $250 million in bonds to finance these capital expenditures: reconstruction of roadbeds and roadways; widening, replacing and redecking of bridges; rehabilitation of interchanges; and funding required reserve deposits and capitalized interest.

The rating reflects PTC's "strong profile in terms of both commercial and passenger traffic and PTC's ability to raise tolls, with relatively low elasticity observed through recent increases," Fitch said in a news release.

"While PTC has a large capital plan with a sizable debt burden that is expected to increase in the medium term, changes to funding requirements under Act 89 will ultimately result in reduced leverage and increased flexibility for PTC over the longer term."

Passed last year, Act 89 — Pennsylvania's transportation funding bill — affected PTC's financial arrangements. PTC still owes PennDOT an aggregate annual payment of $450 million through fiscal year 2022, but as of July 1, 2014, none of that payment will be dedicated to highways and bridges.

The PTC plays a "vital role in serving the state's major population centers and benefits from a strategic location for commercial traffic, evidenced by its stable historical traffic and revenue growth," the release said. Commercial traffic accounted for 13 percent of traffic in 2013 but generated 43 percent of net toll revenues.

Revenue grew at an average annual rate of 6.3 percent from 1990 to 2013. However, Fitch acknowledged, "there may be political risk associated with implementing toll rates above inflation for multiple years," as is expected in PTC's updated financial plan.

Fitch said PTC's traffic was down by 0.6 percent for fiscal 2013, as compared to flat growth for fiscal 2012 and a 1.3 percent increase for fiscal 2011. Traffic has largely been flat in fiscal 2014 year to date through February. Net toll revenues increased 3.9 percent for fiscal 2013 and 6 percent for fiscal 2014 year to date, reflecting toll increases and reductions in commercial discounts, and building on 5.6 percent and 6.6 percent revenue increases in fiscal 2012 and fiscal 2011.

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