permitted in state statute. City officials report that the state has remitted the monthly allocations to the trustee ontime and in full. However, the state's budgetary challenges have led to delays in other forms of local governmentrevenues, including state shared income taxes, which Chicago officials report are typically delayed by one to twomonths. The city has pledged to remedy any deficiency in the Debt Service Account with funds on hand in thecity's Motor Fuel Tax Fund. However, the city is not required to maintain a minimum balance in this fund. Theordinance for the rated bonds allows the city the option of establishing a DSR but does not require one.STEADY DECLINE IN PLEDGED REVENUES REFLECTS REDUCED MOTOR FUEL CONSUMPTION ANDCHICAGO'S POPULATION LOSS RELATIVE TO OTHER ILLINOIS MUNICIPALITIESPledged motor fuel tax revenues have declined in recent years due to reductions in motor fuel consumption, whichhas reduced total state motor fuel tax revenues, and Chicago's population loss, which has reduced Chicago'sshare of total state motor fuel tax revenues. During the past decade, revenues from the state's motor fuel tax havesteadily declined. According to data provided by the Illinois Department of Transportation, the state's motor fueltaxes generated a total of $1.216 billion in revenues in 2012, which represented an 8% decline from 2002revenues. Annual statewide motor fuel tax collections have declined in each of the past five years at an averageannual rate of 2.5%. The tax is based on gallons consumed, rather than price, so declines in revenue reflectdeclines in consumption. Factors that account for decreased consumption include an increase in the use of fuelefficient vehicles, an increase in gas prices, and the overall economic downturn. Continued declines in fuelconsumption would likely weaken total motor fuel tax revenues available for debt service on Chicago's motor fueltax bonds and other statewide purposes.While fuel consumption trends are affecting gross motor fuel tax revenues, Chicago's population trends areaffecting net motor fuel tax revenues. Between the 2000 and 2010 census counts, the city's population fell from 2.9million residents to 2.7 million residents. Concurrently, the overall population of other incorporated Illinoismunicipalities has grown, particularly as people have moved from Chicago to the surrounding suburbs.Consequently, Chicago's population relative to that of other incorporated municipalities in the state has slowly butsteadily dropped over the past decade. In 2001, this percentage was 27.2%, but by 2012, the percentage was24.2%. This ratio is a key determinant of the state's allocation of motor fuel tax revenues to municipalities, so therate of decline in pledged revenues has exceeded the rate of decline in gross revenues. In 2012, pledged revenuesequaled $49.4 million, which represented a 20% decline from 2002 revenues. Annual pledged revenues havedeclined in each of the past seven years at an average annual rate of 3.7%. As pledged revenues have declined over the past decade, debt service coverage has dropped somewhat butremains adequate. Based on unaudited results, 2012 pledged revenues provided 3.2 times MADS coverage,compared with 2002 pledged revenues, which provided 3.9 times MADS coverage. (MADS is $15.6 million.) Debtservice coverage is not expected to significantly weaken in the future, in part because annual debt service isscheduled to slightly but steadily decline. However, should fuel consumption, population trends, and/or future stateactions materially weaken pledged revenues and debt service coverage, Chicago's motor fuel tax debt rating willlikely weaken.DEBT IS CONSERVATIVELY STRUCTURED BUT SLOWLY AMORTIZEDChicago's motor fuel tax debt is conservatively structured but slowly amortized. All outstanding motor fuel tax debtis fixed rate, and the security is not exposed to any derivatives or interest rate swap agreements. The security istherefore not subject to interest rate or liquidity risks that are associated with variable rate structures. Theordinance governing the rated bonds permits the issuance of variable rate debt and the execution of interest rateswaps, but city management reports no plans to enter into these structures. Going forward, overall debt service isscheduled to slightly decline each year, although principal payments significantly ascend in later years. Payout istherefore quite slow, with just 29% of the principal to be retired in ten years and 71% to be retired in 20 years. Thefinal maturity is scheduled for 2038. A sound ABT requires that pledged revenues in the most recently completed 12 month period provide at least 2.0times coverage of MADS on all existing and new debt. We believe this provision should prevent significantoverleveraging of pledged revenues. City management reports potential plans to issue additional debt through apossible federal Transportation Infrastructure Finance and Innovation Act (TIFIA) loan. The loan application ispending. If the loan is awarded, the city will issue an additional $96.5 million in debt to complete the final phase of the Wacker Drive reconstruction project in downtown Chicago. The new debt would enjoy a parity claim with theoutstanding motor fuel tax revenue debt. Additional revenues would also be pledged to the current and existingdebt. City management projects MADS coverage of 2.7 times on all existing and potential debt.