PROVIDENCE – Fitch Ratings Service has downgraded the rating on $74.06 million worth of R.I. Economic Development Corporation’s motor fuel tax revenue bonds.
The agency cut the rating one notch from A+ to A because of a decline in the revenue collected from the fuel tax that was intended to cover the debt payments on the bonds.
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The bonds are special and limited obligations of the state that are being paid back with 2 cents of the state’s 33-cent motor fuel tax.
But those pledged revenues have experienced steady declines since 2005 at an average rate of 2.1 percent a year, Fitch said. Another declined is forecast for this fiscal year, too.
The motor fuel tax bonds provide the state’s approximately 20 percent share of four transportation projects that were financed primarily with federal transportation funds.
Bond ratings are crucial in repayment of debt because, generally, the higher the rating the lower the interest rates need to attract investors. Downgrades can increase borrowing costs.
