TOPEKA – Governor Laura Kelly announced today that a major credit ratings agency has upgraded the rating on approximately $1.25 billion of outstanding Kansas Department of Transportation highway revenue bonds to “AA” from “AA-.”
Fitch Ratings, one of three nationally recognized statistical ratings organizations, cited the end of transfers from the State Highway Fund (SHF) to the state’s general fund for non-transportation expenditures among the reasons for the upgrade. From 2014 through 2018, under the Brownback administration, the state transferred more than $1.7 billion from KDOT to other parts of the state budget – a practice known as raiding the “Bank of KDOT.”
“Since taking office, my administration has exercised fiscal responsibility resulting in balanced budgets, fully funded schools for the fifth consecutive year, and closing the Bank of KDOT once and for all,” said Governor Laura Kelly. “This rating upgrade indicates that the financial sector recognizes the work we have done to get our state back on track and make Kansas attractive to families and businesses.”
This is the first upgrade for KDOT’s bond ratings since Moody’s Investors Services downgraded the agency’s highway bond ratings in 2014 and subsequent downgrades in 2016 and 2018.
The improved rating of KDOT’s highway bonds is a measure of the agency’s credit quality and allows for borrowing at a lower interest rate. The agency’s Eisenhower Legacy Transportation Program, or IKE, runs through fiscal year 2030 and is on track to fund a total of $10 billion in capital projects.
“The improved bond rating is a testament to the bi-partisan support of funding transportation in Kansas,” said Calvin Reed, recently appointed by Governor Kelly to be the state’s next Secretary of Transportation. “KDOT’s overall financial health helps achieve our mission of making transportation investments that benefit Kansas now and into the future.”
According to the Fitch assessment, KDOT’s rating upgrade to “AA” reflects the steady performance of pledged revenue streams throughout the pandemic, growth in KDOT’s available fund balances, and improvements in the underlying credit quality of the state of Kansas. The assessment cited stability in the primary revenue streams to the SHF, namely sales and motor fuel tax revenues, registration/license fees, and federal reimbursements.
KDOT has plans for additional highway revenue bond issuance beginning in fiscal year 2025, with the first new issuance likely to occur in late 2024 and sized at approximately $250 million. In total, the agency has approximately $1.5 billion in outstanding highway revenue bonds.