The Oregon Department of Transportation heads to market next week to price highway user tax revenue bonds amid political conflict about state transportation funding.
Co-senior managers Wells Fargo Securities and J.P. Morgan have a retail order period set for Wednesday followed by institutional pricing Thursday on $233.7 million of Series 2026A tax exempt subordinate lien highway user tax revenue bonds.
The proceeds will be used to refund commercial paper notes issued as second subordinate lien obligations to fund ODOT capital projects, and to pay issuance costs, according to the preliminary offering document.
"We expect 2026A ODOT revenue bonds will receive strong investor interest in our upcoming pricing. ODOT's credit strength is driven by its strong coverage, diverse mix of revenues dedicated to transportation and conservative fiscal practices," said Jaime Alvarez, debt management director at the Oregon State Treasury.
The deal arrives just after Republicans reported gaining enough petition signatures to force a referendum and stall tax increases approved during a recent special session to fill a
Oregon Gov. Tina Kotek, a Democrat, signed
The increase to title and registration fees and gas taxes would have gone into effect immediately, while changes to weight-mile taxes and new road usage fees take effect from 2027 through 2031.
The No Tax Oregon campaign led by Republican leaders
The tax increases were paused pending validation of the petition signatures. If the secretary of state doesn't validate the signatures by the Jan. 30 deadline, the tax increases take effect.
In the preliminary official statement, the department provides estimates of future pledged revenues under two scenarios: with and without revenue from the 2025 transportation package. For fiscal 2029, the difference is $166.9 million: $922 million without, and $1.09 billion with.
Rating agencies said the state's revenue pledge is solid even if the new tax package doesn't take effect.
"Even with all new revenue removed, we estimate that coverage will remain very strong," S&P Global Ratings said in assigning the bonds its AA-plus rating.
Moody's Ratings assigns the bonds its Aa2 rating. Both S&P and Moody's put the subordinate bonds one notch below their senior lien and Oregon issuer ratings. Fitch Ratings assigns the subordinate bonds its AA-plus rating, capped at its equivalent issuer rating for Oregon. All outlooks are stable.
HB 3991 is one of two bills passed during the month-long special
The Highway User Tax Revenue program derives revenues from a mix of motor fuel, motor carrier, weight mile, usage and vehicle title and registration fees.
Under HB 3991, Oregon's existing road usage charge program will become mandatory, fully phasing in for all electric vehicles and hybrids by July 1, 2031, according to an online investor presentation.
"Changes to weight mile charges and the road usage charge program revenues will remain in place regardless of the outcome of a potential voter referendum," the investor presentation said. Road usage charge increases tied to the amount of motor vehicle fuel taxes would not be implemented if voters reject the increases, the investor presentation said.
Fitch cited the "exceptional resilience" of the highway bonds' security structure and the anticipation that pledged revenues will grow along with U.S. inflation for its AA-plus rating.
Even if additional debt issuance were assumed in the bonds test for each lien, Fitch said, net pledged revenues could sustain significant decline and still comfortably meet maximum annual debt service requirements on the senior, subordinate, and second subordinate lien bonds.
Debt service coverage would remain strong even if the taxes are overturned by voters in November, Moody's analysts said in a pre-sale ratings report.
Minimal pledged revenue growth will continue without the implementation of certain fee or tax increases from HB 3991 and aggregate debt service coverage will remain right around four times revenues, Moody's analysts said in assigning the stable outlook.
The passage of the Keep Oregon Moving legislation in 2017 and other revenue increases over the past decade are enough to support the bonds, even if the tax and fee hikes approved in November are overturned, S&P analysts said.
"Excluding Build America Bonds (BABs) subsidies, pledged revenue increased by 1.9% to $903 million in fiscal 2024 and 2.8% to $928 million in fiscal 2025," S&P analysts said. "Overall, we view ODOT's additional bonds test provisions as very strong, limiting coverage dilution from future debt issuances."
S&P analysts said they believe the state's proactive planning and management will also help it navigate potential outcomes from the referendum, though the referendum could result in operational or budgetary difficulties for the department.
"However, we expect ODOT will adhere to its very strong additional bonds tests (financial tests it must pass before issuing new debt) on the senior and subordinate-lien bonds given the priority pledge on revenue for debt service," S&P analysts said.
The forecast of pledged revenues for highway user tax revenue bonds estimate $907.6 million in revenues in fiscal year 2026 without funding from the 2025 transportation bill and $1.005 billion next year with the increased revenue.
The state's senior lien requires pledged revenues are three times greater than required debt payments on all outstanding and proposed bonds and two times coverage on its subordinate lien bonds.
All of ODOT's outstanding long-term bonds are fixed-rate as is the case for the proposed bonds, according to the online investor conference.
The municipal advisor is Public Resources Advisory Group. Orrick, Herrington & Sutcliffe is bond and disclosure counsel.
