Draper, UT Sales Tax Revenue Bonds Raised To 'AAA' From 'AA' On The Application Of Our Criteria

CENTENNIAL (S&P Global Ratings) April 23, 2019--S&P Global Ratings raised its long-term rating to 'AAA' from 'AA' on Draper, Utah's sales tax revenue bonds outstanding. At the same time, S&P Global Ratings affirmed its 'AA+' long-term rating on the city's general obligation (GO) bonds outstanding. The outlook is stable.
"The raised rating reflects our view of the application of our priority-lien tax revenue debt criteria, published Oct. 22, 2018, on RatingsDirect," said S&P Global Ratings credit analyst David Mares. "Our criteria factors in both the strength and stability of the pledged revenue, as well as the general credit quality of the municipality where taxes are distributed and collected," Mr. Mares added.
Key credit considerations include:
  • A strong economic base that is tied to both the Salt Lake City and Provo-Orem economic areas, as well as state-shared component of pledged revenue;
  • Our view that nationwide sales taxes have historically demonstrated low volatility, and local sales taxes exhibiting a history of low volatility;
  • Growing sales tax revenue consistent with the state's economic recovery, leading to very strong maximum annual debt service (MADS) coverage;
  • We believe that the city's creditworthiness is a limiting factor for the priority lien rating; and
  • The city's additional bonds test (ABT) at 2.0x MADS and dependence on pledged revenue for general operations, which reduces the likelihood that the city will issue additional debt to the fullest extent of the additional bonds test (ABT).
Draper is located in the southeast corner of the Salt Lake Valley just southeast of Salt Lake City and just northwest of Provo, within both Salt Lake County and Utah County. It has a current population of approximately 47,710 residents and a build-out population of 75,000.
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