Press Release

Morningstar DBRS Confirms Credit Ratings on High-Performance Transportation Enterprise - C-470 Express Lanes Project's Senior Revenue Bonds and TIFIA Loan at BBB, Stable Trends

Infrastructure
June 26, 2025

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings at BBB on the Senior Revenue Bonds and the TIFIA Loan issued under the Transportation Infrastructure Finance and Innovation Act program (TIFIA) to partially fund the Colorado Department of Transportation's (CDOT) Colorado 470 (C-470) express lanes project (the Project). Both trends are Stable. The credit rating confirmation reflects continued increases in transaction volumes and pledged revenue following a weak start to operations in 2020 during the height of the COVID-19 pandemic.

The borrower is Colorado High-Performance Transportation Enterprise (HPTE), a government-owned business within and division of CDOT. HPTE was created by the Funding Advancements for Surface Transportation and Economic Recovery Act of 2009 (FASTER) and structured as an enterprise, pursuant to FASTER, to be exempt from the Colorado Taxpayer Bill of Rights laws limiting public indebtedness. HPTE is now doing business as the Colorado Transportation Investment Office (CTIO) and uses CTIO for all legislative, legal, and contractual documents.

KEY CREDIT RATING CONSIDERATIONS
CDOT's direct involvement supports the Project's credit ratings, but they are constrained by the uncertainty related to traffic volume levels on the managed lanes and the risk that traffic materially underperforms projections. Under the Project's contractual structure, CDOT is responsible for the performance of operations and maintenance (O&M) and lifecycle work on the corridor and, in the event toll revenues are insufficient to support those works, CDOT would ultimately be responsible for any shortfall in funding.

The Project achieved toll commencement on August 18, 2020, but traffic on C-470 has so far underperformed its initial forecast. Construction delays resulting in the roadway opening at the height of the COVID-19 pandemic, the overall shift in traffic patterns post-pandemic because of hybrid work schedules, and the related reduction in commuter traffic are the key factors driving this underperformance.

Favorably, for calendar year 2024, transaction volumes and toll revenue increased 11.7% and 12.9% year over year, respectively. However, even with improved performance, transaction volumes and collected toll revenue were below the original forecast by 13.0% and 31.2%, respectively, for 2024.

The CTIO implemented the Express Lanes Safety and Toll Enforcement Program (the Program) in September 2023, which allows the CTIO to levy civil penalties for drivers that ingress/egress illegally into/out of the express lanes. Since its implementation, the Program has resulted in significantly increased pledged revenue and reduced leakage. Per the CTIO Coverage Certificate for the 12-month period ended December 31, 2024, pledged revenue totaled $31.7 million in 2024, which included $15.7 million of toll revenue and $16.0 million of civil penalty revenue. Pledged revenue in 2024 increased 88.7% over the $16.8 million realized in 2023.

Transaction volume and toll revenue continued to increase in 2025, benefiting from the Program's effectiveness in deterring drivers from attempting to avoid paying tolls. Year-to-date transactions and toll revenue through March 31, 2025, increased 16.3% and 17.6%, respectively, as compared with those in the same period in 2024.

Also driving the increase in pledged revenue are implemented toll rate adjustments. The CTIO's board approved toll rate adjustments in June 2024 that took effect on August 1, 2024. The new rate schedule resulted in an increase of 3.5% on average for automatic vehicle identification and license plate toll rates because of a combination of inflation, increased equipment maintenance costs, and increasing toll transaction processing costs. Toll rates are expected to increase 3.0% in the period effective August 1, 2025.

The Project has additional liquidity available from multiple sources that the CTIO can draw on in the event cash flow after debt service is insufficient to fully cover O&M in any given year. As of the end of December 2024, these sources included an undrawn ramp-up reserve account (RURA) of $6.6 million, a senior debt service reserve account (DSRA) of $4.5 million, a TIFIA DSRA of $3.0 million, an O&M reserve account of $6.1 million, a renewal and replacement reserve account of $0.8 million, and a surplus account of $6.6 million.

A subordinate O&M backup loan can also provide liquidity, if needed. This loan can be used to cover O&M and lifecycle expenses, and any draws from the loan to cover O&M cost overruns will not trigger an event of default. CDOT also approved a $4.0 million line of credit to fund O&M loan draws as needed. A $750,000 draw on the O&M backup loan was made on June 30, 2023, and deposited into the Project O&M account. It will be repaid from the surplus account in future periods in the amount of principal plus accrued interest. This was done to meet the all-obligations coverage test of 1.0 times (x) as part of the coverage metrics in the master trust indenture. Amounts in the surplus account are not included in the all-obligations coverage test; however, surplus amounts can be used to repay the O&M backup loan draw and the accrued interest. Any amounts drawn from the O&M backup loan have a maximum repayment period of 40 years.

CREDIT RATING DRIVERS
A positive credit rating action is unlikely in the near term because of the Project's relatively weak performance since inception.

An underperformance of transaction volume and revenues that leads to significantly weaker financial metrics could result in a negative credit rating action.

FINANCIAL OUTLOOK
The Project's total debt service coverage ratio (DSCR) per the CTIO Coverage Certificate for the 12-month period ended December 31, 2024, was 3.18x, including the RURA of $6.6 million; excluding the RURA, the DSCR was 2.63x. Pledged revenue for the 12-month period was $31.7 million, consisting of $15.7 million of toll revenue and $16.0 million of civil penalty revenue. The effectiveness of the Program in deterring illegal toll avoidance is expected to help increase toll revenue in the near term.

Recovery from the COVID-19 pandemic is ongoing on overall toll road and express-lane traffic in the state of Colorado. Generally, Morningstar DBRS expects gradual traffic volume recovery in Colorado in 2025 as people work more days in the office and overall travel returns to pre-pandemic levels.

Morningstar DBRS' base case has a forecast minimum DSCR of 1.83x. However, the long-term forecast for the Project is expected to be revised following completion of an updated traffic and revenue study later this year and could benefit from the expected implementation of dynamic tolling in the second half of 2026.

CREDIT RATING RATIONALE
The credit ratings reflect the Project's financial outlook, underpinned by strengths that include (1) O&M and lifecycle risks ultimately retained by CDOT, (2) a government-owned business as the borrower, (3) a flexible TIFIA debt servicing schedule, (4) a large and prosperous service region, and (5) CTIO's fee-setting ability. The Project's challenges include (1) volume risk, (2) traffic forecasting error, (3) exposure to economic conditions, and (4) no covenant preventing competing highways.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) at https://dbrs.morningstar.com/research/454196.

CREDIT RATING DRIVERS AND FINANCIAL RISK ASSESSMENT (FRA)
(A) Weighting of Credit Rating Drivers
In the analysis of High-Performance Transportation Enterprise - C-470 Express Lanes Project, the credit rating drivers listed in the volume-based section of the methodology are considered in the order of importance.

(B) Weighting of FRA Factors
In the analysis of High-Performance Transportation Enterprise - C-470 Express Lanes Project, the following FRA factor listed in the methodology was considered more important: Minimum DSCR.

(C) Weighting of the Credit Rating Drivers and the FRA
In the analysis of High-Performance Transportation Enterprise - C-470 Express Lanes Project, the FRA carries greater weight than the credit rating drivers.

Notes:
All figures are in U.S. dollars unless otherwise noted.

Morningstar DBRS applied the following principal methodology:
-- Global Methodology for Rating Public-Private Partnerships (August 13, 2024), https://dbrs.morningstar.com/research/437820

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025; https://dbrs.morningstar.com/research/447186), which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following criteria has also been applied:
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025),
https://dbrs.morningstar.com/research/454196

The credit rating methodologies used in the analysis of this transaction can be found at:
https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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