Fitch Ratings has affirmed the following ratings of the
Issuer Default Rating (IDR) at 'AA';
Outstanding certificates of participation (COPS), taxable series 2021 at 'AA-'.
The Rating Outlook is Stable. The ratings have been removed from Under Criteria Observation.
RATING ACTIONS
Entity / Debt
Rating
Prior
LT IDR
AA
Affirmed
AA
LT
AA
Affirmed
AA
LT
AA-
Affirmed
AA-
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of 1
VIEW ADDITIONAL RATING DETAILS
The 'AA' IDR reflects the authority's financial resilience assessment of 'aa' based on a 'Low Midrange' level of budgetary flexibility and maintenance of unrestricted general fund reserves of at least 15% of spending. The rating also incorporates the authority's strong population trend and 'Midrange' demographic and economic level metrics.
The long-term liability burden is also assessed as 'Midrange', inclusive of the debt of the
The 'AA-' rating on the COPs reflects a higher degree of optionality associated with the appropriation of lease payments.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
For the IDR:
A sustained decline in available general fund reserve levels below 15% of spending, which would reduce Fitch's assessment of financial resilience to 'a';
----Weakened underlying economic and demographic performance including but not limited a weakened population trend, rising unemployment and lower resident income;
A sustained 20% increase in the long-term liability burden, absent changes in resident income or governmental expenditures and revenues.
For the COPs:
A downgrade of the authority's IDR.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
For the IDR:
A sustained increase of available general fund reserve levels above 20% of spending;
An approximately 40% decrease in the authority's's liabilities metrics assuming current levels of revenues, expenditures and/or resident personal income.
For the COPs:
An upgrade of the authority's IDR.
SECURITY
The tax-exempt and taxable series 2021 COPs are supported by lease payments received by the trustee from
Fitch's Local Government Rating Model
The Local Government Rating Model generates Model Implied Ratings which communicate the issuer's credit quality relative to Fitch's local government rating portfolio (the Model Implied Rating will be the IDR except in certain circumstances explained in the applicable criteria). The Model Implied Rating is expressed via a numerical value calibrated to Fitch's long-term rating scale that ranges from 10.0 or higher ('
Model Implied Ratings reflect the combination of issuer-specific metrics and assessments to generate a Metric Profile and a structured framework to account for Additional Analytical Factors not captured in the Metric Profile that can either mitigate or exacerbate credit risks. Additional Analytical Factors are reflected in notching from the Metric Profile and are capped at +/-3 notches.
Ratings Headroom & Positioning
Metric Profile: 'AA' (Numerical Value: 8.19)
Net Additional Analytical Factor Notching: 0.0
Key Rating Drivers
Financial Profile
Financial Resilience - 'aa'
Revenue control assessment: Low
Expenditure control assessment: High
Budgetary flexibility assessment: Low Midrange
Minimum fund balance for current financial resilience assessment: >=15.0%
Current year fund balance to expenditure ratio: 54.2% (2023)
Five-year low fund balance to expenditure ratio: 15.7% (2023)
Revenue Volatility - 'Weakest'
The revenue volatility metric is an estimate of potential revenue volatility based on the issuer's historical experience relative to the median for the Fitch-rated local government portfolio. The metric helps to differentiate issuers by the scale of revenue loss that would have to be addressed through revenue raising, cost controls or utilization of reserves through economic cycles.
Lowest three-year revenue performance (based on revenues dating back to 2005): 33.3% decrease for the three-year period ending fiscal 2012
Median issuer decline: -4.5% (2023)
Demographic and Economic Strength
Population Trend - 'Strongest'
Based on the median of 10-year annual percentage change in population,
Population trend: 1.8% 2022 median of 10-year annual percentage change in population (81st percentile)
Unemployment, Educational Attainment and MHI Level - 'Midrange'
The overall strength of
Unemployment rate as percentage of national rate: 94.4% 2023 (55th percentile), relative to the national rate of 3.6%
Percent of population with a bachelor's degree or higher: 35.0% (2022) (64th percentile)
MHI as a percent of the portfolio median: 102.5% (2022) (53rd percentile)
Economic Concentration and Population Size - 'Strongest'
The composite metric acts asymmetrically, with most issuers (above the 15th percentile for each metric) sufficiently diversified to minimize risks associated with small population and economic concentration. Downward effects of the metric on the Metric Profile are most pronounced for the least economically diverse issuers (in the 5th percentile for the metric or lower). The economic concentration percentage shown below is defined as the sum of the absolute deviation of the percentage of personal income by major economic sectors relative to the
Population size: 4,555,833 (2022) (above the 15th percentile)
Economic concentration: 18.1% (2023) (above the 15th percentile)
Long Term Liability Burden
Long-Term Liability Burden - 'Midrange'
Liabilities to personal income: 7.8% Analyst Input (31st percentile) (vs. 0.0% 2023 Actual)
Liabilities to governmental revenue: 203.0% Analyst Input (38th percentile) (vs. 207.4% 2023 Actual)
Carrying costs to governmental expenditures: 14.1% (2023) (55th percentile)
Analyst inputs for the long-term liability metrics reflect adjustments to account for scheduled amortization of outstanding principal in FY24 and the use of market value in place of personal income.
PROFILE
The authority provides fire and emergency medical services to residents throughout
The board of the three fire districts will remain in place, adopting budgets and setting tax rates. The three fire district boards also appoint the seven members of the authority's board. The authority has no taxing power, relying on membership fee funding from the three fire districts. Fire district revenues are generated by property tax levies.
Although
The broad and diverse regional economy is anchored by professional and business services, retail and wholesale trade, education and health services, and government. Economic diversification has been a major emphasis of local leaders, and the success of those efforts is evidenced by notable growth in technology, healthcare and bio/life sciences, advanced business services and manufacturing.
Fitch expects
Sources of Information
In addition to sources of information identified in Fitch's applicable criteria specified below, this action was informed by data from DRIVER by Solve.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
Additional information is available on www.fitchratings.com
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