Fitch may be coming down on most economies but for the OC economy it has favorably upgraded two of its revenue transportation bonds. The bonds are secured by a half-a-cent tax increase as initiated by proposition ‘M’ to widen freeways across the county. The measure will allow for better public transportation and ameliorate freeways, overall.
The ratings agency was impressed by Orange County’s recovering economy with better than average unemployment rates, which had sunk below the national average during the sub-prime meltdown. Also, Fitch notes the county’s economy is well diversified, receives abundant revenues from tourism—namely Disneyland—and has a broad base of citizens who make well above an average income.
Measure ‘M’ revenue bonds has secured $352.5M in total, originated in 2010 with a credit rating of AA+ upgraded from AA. Specific reasons for the upgrade include; debt service coverage of 1.3, a fundamentally strong economy and limited operational risk.
Revenue bonds are municipal bonds that use tax revenues to pay its investors. These bonds securitize the investment by raising taxes or securing a source of income from the bond issue, in this case, a freeway system. Municipal bonds garner a higher effective yield thanks to a tax incentive built into these investments. Those investors of the series 2010 measure ‘M’ bonds mentioned are rewarded for the credit upgrade described. However, investors should always be cautious and speak to an investment professional when investing.
Comments