CHICAGO - Wisconsin will refund $132 million of transportation revenue bonds Nov. 6, two days after state voters decide on a proposed constitutional amendment that would bar future raids on the state's transportation fund for other expenses.
JPMorgan is running the books with Jefferies, Loop Capital Markets LLC, Piper Jaffray & Co., and US Bancorp rounding out the syndicate. Robert W. Baird & Co. is advising the state. Quarles & Brady LLP is bond counsel. The bonds mature serially from 2019 to 2029.
With the vote looming Tuesday, state finance officials stress in an investor presentation the absence of any impact for bondholders.
The bonds are secured by a first lien pledge of program income that includes vehicle registration and other registration-related fees, said Kevin Taylor, Wisconsin's capital finance director.
Program income is deposited directly into the redemption fund which is held by the trustee and is separate and distinct from the state's transportation fund, Taylor said. "The amendment has no direct impact on bondholders and regardless of the outcome program income will continue to be collected to be first collected by the trustee and deposited in the redemption fund," he said.
Once debt service is paid on the state's $2 billion of transportation revenue bonds, excess revenue is only then released to state's transportation fund. The state adheres to a 2.5 times coverage ratio with vehicle registration fees accounting for 83% of the pledged revenues for debt service in fiscal 2013.
Other vehicle registration-related fees pledged to the bonds include title transaction fees, counter service fees, and personalized license plate issuance and renewal fees.
The push to amend the state constitution to ban the diversion of transportation fund revenues is a reaction to raids on the fund by past administrations and legislatures that siphoned off more than $1 billion for other purposes.
The referendum asks voters whether the constitution should include a clause limiting the use of revenue generated from road, airport, and harbor taxes and fees to the transportation fund.
The majority of revenue comes from gasoline taxes, but other taxes and fees, some of which back the state's transportation bonds, also eventually flow to the fund.
The state legislature approved placing the referendum on the ballot in 2011 and 2013. Under law, a constitutional amendment must pass twice before it can appear on the ballot. A majority vote is needed to win approval.
The state earlier this year issued $400 million of mostly new money under the credit. Kroll Bond Rating Agency gave the bonds a AAA rating. Fitch Ratings, Moody's Investors Service, and Standard & Poor's all rate the bonds in the mid- to high-double-A category. New reports have not yet been released.
Kroll's rating - based on its special tax rating methodology published in 2012 - reflects very strong coverage of more than three times maximum annual debt service in fiscal 2013 and a strong test that precludes additional issuance without maintaining 2.25 times coverage on the first lien.
Kroll's primary credit concern is a lack of consistent growth of the pledged revenues over the last five years. A history of consistent declines in pledged revenues or a significant decline in MADS coverage levels could lead to a downgrade.
