CDOT’S Transportation Revenue Anticipation Notes Rated ‘AA’; Outlook Stable

The rating outlook is stable.

The TRANs are special, limited obligations of CDOT payable solely from the trust estate, consisting of federal transportation and state matching funds. They are secured by annual allocations from federal transportation funds and state match funds at the sole discretion of the Transportation Commission, which provides an offset to federal reauthorization risk. State matching funds are largely derived from the highway users tax fund (HUTF), which includes the state portion of the motor fuel tax and vehicle registration fees. Under certain conditions and limitations, CDOT is also entitled to receive up to 2% of gross general fund revenues. State appropriation is not necessary for federal revenues and HUTF that are constitutionally required to be used for highways.

The federal program, which was once a formula-driven program funded on a multiyear basis has now morphed into a program where future policy is less certain, funding levels are less predictable, and the program is more dependent on frequent action to extend authorization and on general fund transfers that will likely need to be continued indefinitely barring an increase in the federal gas-tax or a significant reduction in spending.

The voter-approved authorization limits note issuance to $1.7 billion, including a cap of $2.3 billion in total debt service, which was reached following issuance of the series 2004 notes. In addition, the indenture requires that at the date of issuance of additional TRANs, anticipated debt service in any fiscal year cannot exceed 50% of federal funding from prior year.