Potter County, TX 2016 Certificates Of Obligation Rating Lowered To 'AA-' From 'AA' On Weakened Debt Profile

DALLAS (S&P Global Ratings) March 15, 2019--S&P Global Ratings lowered its 
long-term rating on Potter County, Texas' series 2016 certificates of 
obligation to 'AA-' from 'AA'. At the same time, S&P Global Ratings assigned 
its 'AA-' long-term rating to the county's series 2019 certificates of 
obligation. The outlook is stable. 

"The one-notch downgrade reflects our view that the county's weakened debt 
profile, in combination with below-average wealth and income levels, is no 
longer comparable with that of peers at the 'AA' rating level, despite sound 
finances and strong management," said S&P Global Ratings credit analyst Amahad 

The series 2019 certificates represent a significant issuance for the county, 
ultimately elevating the debt burden to levels we consider weak and given the 
increased debt service requirements and slow debt amortization, we believe the 
debt profile could remain elevated over the near-to-medium term. However, 
considering the county's large tax base and the ability to manage a dedicated 
property tax rate for debt service, we believe Potter County maintains 
significant flexibility to fund its outstanding obligations without pressuring 
its finances. The downgrade also represents a change in our view of the local 
economy to very weak from adequate, reflecting slower regional growth and 
lower levels of wealth and income relative to those of regional, state, and 
national peers. In our view, Potter County remains financially strong, as 
reflected in positive budget performance and healthy reserve levels supporting 
the stable outlook over the next two years. 

The series 2019 certificates will be used to fund the construction of a new 
courthouse facility. 

The rating reflects our view of the county's:
  • Very weak economy;
  • Strong management;
  • Strong budgetary performance;
  • Very strong budgetary flexibility;
  • Very strong liquidity;
  • Weak debt and contingent liability profile; and
  • Strong institutional framework score.
The stable outlook reflects our opinion that Potter County will maintain 
stable budgetary performance resulting in continued very strong reserve levels 
and liquidity, despite its elevated debt burden. We expect that modest 
economic growth will continue to provide additional revenues for the county to 
support ongoing structural balance. We do not expect to change the rating 
within the next two years. 

A higher rating would likely follow a significant expansion of the economic 
base, namely improved wealth and income levels that are comparable with those 
of higher rated peers. 

We could lower the rating if the county experienced a prolonged period of weak 
budgetary performance leading to material deterioration in available reserves. 
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