Denver City & County's 2019A And B GO Bonds Assigned 'AAA' Rating; Other Ratings Affirmed

CENTENNIAL (S&P Global Ratings) April 15, 2019--S&P Global Ratings assigned its 'AAA' rating to Denver City & County's series 2019A and 2019B general obligation (GO) bonds. At the same time, S&P Global Ratings affirmed its 'AAA' rating on the city's GO bonds outstanding and its 'AA+' rating and underlying rating (SPUR) on various existing city certificates of participation (COPs) and lease-secured obligations. The outlook is stable.
Denver is eligible to be rated above the sovereign because we believe the city can maintain better credit characteristics than the U.S. in a stress scenario. Under our criteria "Ratings Above The Sovereign: Corporate And Government Ratings—Methodology And Assumptions," published Nov. 19, 2013, U.S. local governments are considered to have moderate sensitivity to country risk. The city's locally derived revenues are the source of security for the bonds, and the institutional framework in the U.S. is predictable with significant U.S. local government autonomy. In a potential sovereign default scenario, U.S. local governments would maintain financial flexibility through their ability to continue collecting locally derived revenues and their independent treasury management.
Bond proceeds will be used to finance additional projects as part of the city's voter-authorized $937 million bonding program, Elevate Denver, and also to refund debt outstanding for savings.
The ratings reflect our assessment of Denver's:
  • Very strong economy;
  • Very strong management;
  • Strong budgetary performance;
  • Very strong budgetary flexibility;
  • Very strong liquidity;
  • Weak debt and contingent liability profile; and
  • Strong institutional framework score.
The outlook is stable. "Denver's robust economic growth has been accompanied by close management of the resources and challenges associated with rapid expansion," said S&P Global Ratings credit analyst Jane Ridley. We expect city officials to continue to keep pace with this growth while planning for future needs, such as the strategic initiative to provide affordable housing. This stable outlook is further supported by Denver's history of balanced operations and strong reserves. Given the city's track record, we do not expect the rating to change over the two-year outlook horizon.
Although we do not view it as likely over the outlook horizon, we could lower the rating if the city develops a structural imbalance that goes unaddressed, or starts to otherwise deteriorate financially given the pressures of rapid growth. In addition, should the debt and pension burden begin to place additional pressure on Denver's operations or flexibility, we could lower the rating.
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