Pasquotank County Public Facilities Corp, NC COPs Upgraded To 'A+' From 'A' On Improved Economy; Outlook Stable

WASHINGTON D.C. (S&P Global Ratings) March 24, 2020--S&P Global Ratings raised its rating to 'A+' from 'A' on Pasquotank County Public Facilities Corp., N.C.'s certificates of participation (COPs), supported by Pasquotank County. The outlook is stable.
The county's appropriation-backed debt, which we rate based on the application of our "Issue Credit Ratings Linked To U.S. Public Finance Obligors’ Creditworthiness" criteria (published Nov. 20, 2020), is rated one notch off the implied general obligation debt rating.
Rental payments made under an installment-financing agreement secure the COPs. Base-rental payments and the deed of trust are assigned to the trustee. Annual installment payments are subject to appropriation. The agreement requires the county's budget officer to include installment payments and additional payments in the budget request. We recognize the deletion of the funds from the budget would require a county council resolution, including an explanation for the action. We understand notice to the trustee and others is required in case of deletion. We also understand no abatement or reduction of payments is permitted. Lease payments are not subject to any offsets or abatements.
"The upgrade is based on improvement in the county's economy, with unemployment levels dropping to just 5.3% in 2018 from above 10% in 2013, coupled with the strengthening of general fund reserves through operating surpluses in each of the past six fiscal years," said S&P Global Ratings credit analyst Timothy Barrett.
We believe that Pasquotank County's reserve levels (20% of operating expenditures, or $10.3 million in 2019) well-position the county to navigate the economic and financial challenges posed by the COVID-19 pandemic. However, if economic disruption is more prolonged, the county's economy could be affected. We will continue to monitor the effects on the county's revenues and expenses.
Pasquotank County's credit profile is supported by the county's history of consistently strong financial performance and flexibility.
The rating reflects our opinion of the county's general creditworthiness, including its:
  • Weak economy;
  • Adequate management;
  • Strong budgetary performance;
  • Very strong budgetary flexibility;
  • Very strong liquidity;
  • Very strong debt and contingent liability profile; and
  • Very strong institutional framework score.
Improvement in the local economy, including increases in wealth and income indicators to levels more commensurate with that of higher-rated peers, could lead us to raise the rating.
If the county's financial operations were to significantly weaken due to a national recession or the effects of COVID-19, resulting in materially diminished general fund reserves, the rating could become pressured.
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