Fitch Rates MDOT’s $300M Consolidated Transportation Bonds AA+, Outlook Stable

Fitch Ratings has assigned an ‘AA+’ rating to the Maryland Department of Transportation (MDOT) $300 million of consolidated transportation bonds, series 2020.

The bonds are expected to be offered by competitive sale on Oct. 7, 2020.

According to Fitch Ratings:

The ‘AA+’ rating on MDOT’s consolidated transportation and county transportation bonds reflects limited growth prospects for the various dedicated taxes, looking through the current coronavirus pandemic-driven declines, and robust resilience of the structure to economic declines

Consolidated transportation bonds are payable from a portion of taxes collected in the state’s transportation trust fund (TTF), following specific statutory allocations (collectively, pledged tax revenues), and prior to being available for other uses by MDOT.

Additionally, Fitch has affirmed the following ratings:

  • Outstanding MDOT consolidated transportation bonds at ‘AA+’
  • Outstanding MDOT county transportation bonds issued on behalf of Baltimore City at ‘AA+’.

County transportation bonds are paid from an allocation of highway user revenues (HUR), which are capital grants paid to Baltimore City, counties, and municipalities from all revenues of the TTF, but subordinate to the pledge for the consolidated transportation bonds and certain other MDOT expenses.

At a briefing in June, MDOT Secretary Greg Slater said that the Department was working to close a revenue decline of approximately $550 million for FY 20 and $490-550 million for FY 21.

A 2018 MACo Legislative Initiative increased the county share of HUR for five years, from FY 2020 through 2024, from 1.5% to 3.2%, with additional funding also supporting Baltimore City and municipal governments.

The State created the highway user revenue formula in 1968, and for more than forty years afterward, local governments had received at least 30 percent of transportation revenues— mostly motor fuel tax and vehicle registration fees—to fund their roads and bridges. The Great Recession forced cuts to this area deeper than those in any other component of the state budget.

Twenty-three counties’ share of funds plummeted from nearly $300 million in 2007 to only $40 million in 2018: an 87 percent decimation. In 2018, Baltimore City alone received nearly $100 million less than it did before the cuts.

Stay tuned to Conduit Street for more information.

Useful Links

Previous Conduit Street Coverage: MDOT Writes Down FY 20, FY 21 Local HUR Distributions By Millions

Previous Conduit Street Coverage: Governor Signs MACo’s HUR Initiative Bill