Analyses of GARVEE Bonding Capacity 2008

VI. Summary of Results

Due to consistent increases in federal deposits in the State Highway Account over the past two years, the current analyses resulted in a slightly higher bonding capacity than last year’s results. The increase in the bonding capacity compared to the longer amortization period is less than the increase of the bonding capacity in the shorter amortization period due to a steeper yield curve over the prior year.

The analyses show that bond issuance with a 6-year maturity corresponds to a bonding capacity ranging from approximately $1.51 billion (market sensitivity case) to approximately $1.56 billion (base case).  These levels represent an increase of approximately $68 million and $70 million, respectively, over 2007, or an increase of approximately 4.70% for a 6-year maturity over last year.

The Commission policy established 12 years as the maximum maturity for GARVEE bonds.  If all future bond issues are structured with a 12-year amortization period consistent with the current Commission policy and at current interest rate levels, the remaining capacity for issuance of GARVEE bonds would be from approximately $2.58 billion (market sensitivity case) to approximately $2.73 billion (base case).  These levels represent an increase of approximately $57 million and $59 million, respectively, over 2007, or an increase of approximately 2.25 percent for a 12-year maturity over last year.

Under the current analyses, a longer amortization period would increase the bonding capacity, but at a lower rate of increase for longer maturities compared to the shorter maturities.  If the Commission policy changes to allow a longer maximum maturity, the bonding capacity would change accordingly.

The average monthly deposits into the State Highway Account, from 2002 on, is based on all federal transportation funds that are deposited into the State Highway Account and are legally available to be pledged in the Master Trust Indenture to pay the GARVEE bonds, as discussed previously under “Pledged Revenues” in Section IV of this report.

The interest rates used for the 2008 analyses assume an AA rating on the GARVEE bonds.  As of February 29, 2008, the weighted average interest rate for AA rated bonds with a 6-year final maturity is 3.58 percent and with a 12-year final maturity is 4.13 percent.

The following table summarizes key results of our analyses. Detailed worksheets supporting the results can be found in Attachments C and D1 and D2 for ease of reference.

Summary of Results for GARVEE Bonding Capacity Sensitivity Analyses