Fitch Affirms Michigan Natural Resource Commission's Revs at 'AA-'; Outlook Stable
--\$7.9 million NRC state park gross revenue bonds, series 2002.
The Rating Outlook is Stable.
The bonds are payable from a first lien on state park revenues, comprised primarily of camping fees and motor vehicle entry permits (collected in the form of recreation passport revenues).
KEY RATING DRIVERS
FIRST LIEN PLEDGE OF NARROW REVENUE STREAM: The bonds have a first lien on a narrow stream of revenues derived from state park utilization.
ROBUST COVERAGE OF DEBT SERVICE: Coverage of maximum annual debt service (MADS) by the pledged revenue stream has been robust and should remain so as there are no plans for additional debt.
Continued strong coverage of debt service by the pledged revenue stream.
The bonds are payable from a first lien on state park revenues, comprised primarily of park fees, concessions and motor vehicle entry permits, the latter of which are now collected from in-state residents in the form of recreation passport revenues. About 63% of park revenues are in the form of park fees and concessions, with another 31% from recreation passport revenues as of the fiscal year ending Sept. 30, 2013, the most recent audited information available.
The Department of Natural Resources (the department) manages the state's large parks network and has the discretion to raise park fees and concessions without legislative approval; changes to recreation passport revenues and other motor vehicle entry permits require legislative consent. The NRC, which provides oversight of the department's policies and practices, has covenanted to revise recreation passport and other motor vehicle revenues to provide sufficient revenues to pay debt service.
Recreation passport fees are collected from in-state residents at the time of motor vehicle registration or when entering a park. Out-of-state residents are also subject to park fees. Rate changes have been infrequent, although modest recreation passport fee increases were instituted in January 2013 and a range of motor vehicle entry permit fees was raised in fiscal years 2014 and 2015.
State park revenues, which had experienced several years of flat or declining performance during the recession, have tracked higher in recent years. Fiscal 2013 pledged revenues, at nearly \$44.9 million, were 1.2% higher than fiscal 2012, and 12.2% higher than the lowest point, in fiscal 2009. Recent performance has reflected both growing utilization as well as the implementation of the recreation passport, which replaced the previous system of collecting motor vehicle permits. Pledged revenues in fiscal 2013 provided 38.2x coverage of MADS.
About \$7.9 million in principal remains outstanding from \$15.5 million issued in 2002 to fund a major renovation at Sterling State Park in southeast Michigan. The 1994 statutory authorization for state park gross receipt bonds allows up to \$100 million in issuance. Additional debt, which requires meeting a two times coverage test by historical revenues, is not presently anticipated.