Mitchell, SD 2012-2013 Sales Tax Revenue Bond Rating Raised To 'AA-' On Criteria Application


CHICAGO (S&P Global Ratings) April 17, 2019--S&P Global Ratings raised its long-term rating on the city of Mitchell, S.D.'s series 2012 and 2013 sales tax revenue bonds to 'AA-' from 'A+'. At the same time, we assigned our 'AA-' rating to Mitchell's series 2019 sales tax revenue bonds. The outlook is stable.
"The upgrade reflects the application of our 'Priority-Lien' criteria," said S&P Global Ratings credit analyst Scott Nees. The criteria were published Oct. 22, 2018, on RatingsDirect.
The series 2019 bonds are secured by a first-lien pledge on the city's 2% sales and use tax, adopted pursuant to South Dakota Codified Laws Chapter 10-52 and a city ordinance. The series 2019 bonds are on parity with the city's outstanding series 2012 and 2013 sales tax revenue bonds. Officials will use 2019 bond proceeds to fund the acquisition of property and to make associated watershed improvements for the benefit of Lake Mitchell, a municipal lake within city limits.
The rating under our Priority-Lien criteria factors in the strength and stability of the pledged sales and use tax, as well as the general credit quality of Mitchell (the obligor's creditworthiness).
Mitchell is on Interstate 90 in southeastern South Dakota's Davidson County and is home to a population of 15,645. It is the county seat and a regional economic center serving a trade area. Economic stability and moderate growth in the years following the Great Recession have contributed to the city's stable operating budget and maintenance of very strong reserves and liquidity, and with these, a stable underlying credit profile.
"The stable outlook reflects our expectation that pledged sales tax revenue will continue to provide very strong maximum annual debt service coverage on the city's outstanding sales tax revenue bonds and that the 2% sales and use tax will itself remain more or less stable, supported by a stable regional economic base," added Mr. Nees. We do not expect to change the rating in the two-year outlook horizon.
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