DALLAS -- Ohio is highlighting the strong, multi-layered backing of its highway bonds as it prepares to sell $231 million to pay for highway capital improvements.
The general obligation highway capital improvement program bonds are supported by both the state's full faith credit pledge and state highway fees. The double-barreled backing helps the program garner a top rating from Standard & Poor's, making it the highest rated type of debt offered by the state.
Standard & Poor's affirmed its AAA rating on the bond program. Moody's Investors Service affirmed the bonds at Aa1 and Fitch Ratings affirmed its AA-plus rating with stable outlook.
Loop Capital Markets LLC is senior manager and Bricker & Eckeler LLP is bond counsel.
Ohio uses highway user receipts to repay the bonds -- 68% of the receipts are generated by motor fuel and use taxes and the remaining 32% come primarily from registration and license fees.
"The GO pledge has never been accessed to pay debt service since the lien was first secured in September 1996," Larry Scurlock, assistant debt manager in the Office of Budget and Management, said in an investor presentation.
With a final maturity of 15 years, the bonds are shorter-dated than many of Ohio's transportation bonds which are typically structured with 20- to-25 year terms, according to Johnathan Azoff, director of debt management for Ohio Treasury.
The biennial budget Ohio Gov. John Kasich signed in June reduced income tax rates by 6.3% across all brackets. The new top marginal rate is 4.997% percent. Moody's said the lost revenues have largely been offset by natural, baseline tax revenue growth.
Kasich, who took time off from the presidential campaign trail to deliver the State of the State address on Wednesday, heralded the $5 million in tax cuts for creating a sound budget for the state.
"We have actually lifted Ohio out of the ditch. We started moving again and we are picking up speed. The state of our state is getting stronger every day and the outlook is bright and hopeful here in the Buckeye State," he said.
Ohio has more than $2 billion in its rainy day fund, the most in its history.
Kasich plans to propose another comprehensive tax reform package with more tax relief and reforms as part of the budget's upcoming mid-biennium review.
The state has $8.5 billion in general obligation debt, or 66% of its 2015 total net tax-supported debt. Of this amount, the state has $758.6 million in highway GO bonds outstanding.
Lawmakers have authorized $3.4 billion of highway obligations of which, excluding the upcoming series of highways bonds, $2.69 billion has been tapped over the past 20 years since the program's inception. The state plans to issue $935 million in highway GO bonds between fiscal 2016 and 2021.