NEW YORK, OCTOBER 03, 2024 -- Moody's Ratings (Moody's) has upgraded the County of Cibola, NM's Gross Receipts Tax (GRT) 2014A and 2014B revenue to A3 from Baa1. Concurrently, we have affirmed the county's A3 issuer rating. The county has $16.2 million of outstanding debt as of June 30, 2023. We also removed the stable outlook.
The upgrade concludes a review for possible upgrade initiated on July 24, 2024, in conjunction with an update to the US Cities and Counties methodology.
RATINGS RATIONALE The A3 issuer rating reflects the county's healthy financial position that benefits from conservative budgeting and manageable leverage and fixed costs. The available fund balance ratio is at 33% along with a very strong liquidity ratio of 69% using fiscal 2023 revenue. Liquidity is higher and a better indicator of financial performance because it accounts for restricted funds that will be primarily used for general governmental services such as the fire district and grants that will be used for road maintenance. Reserves are expected to remain above peers as unaudited financials reflect an operational surplus of $1.8 million, despite a planned spend down of grants in fiscal 2025. The rating also incorporates a limited economy that is positioned to modestly grow given ongoing commercial development, even though current economic growth is at a slower pace than the US. Resident income and wealth levels both trail peers, but have remained generally stable over the last three years at 76% and $39,000, respectively. Positively, leverage of 111% and fixed cost of 5.6% are low with no plans for additional debt issuances.
The A3 rating of the county's gross receipts revenue bonds reflects the broad revenue base that will continue to support adequate coverage of over 2x maximum annual debt service (MADS). While the series 2014B has two pledged revenues, the coverage of about 2.3 times is similar to the 2014A due to higher debt service payments. In fiscal 2022, revenues for both bonds increased by 27% for the series 2014A and 29% for series 2014B because the county benefited from construction activity. However, revenues fell in 2023 as construction was completed with a small decline of 0.2% for series 2014A and a larger decline of 12% for the 2014B bonds. Positively, management anticipates pledged revenues will remain stable in the next few years and GRT activity will likely increase as completed construction projects add jobs to the county.
RATING OUTLOOK
We do not assign outlooks to local government credits with this amount of debt outstanding '
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS
- Significant economic expansion, evidenced by GDP growth, increased resident income to 100% of the nation, and/or improved full value per capita to $60,000 - Continued financial stability following spend down of federal relief funds and grants - Upgrade of the county's issuer rating (GRT)
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
- Significant reduction in fund balance and liquidity ratios to below 25% - Tax base contraction that suppresses the full value per capita ratio - Increased in longterm liabilities ratio that exceeds 200%
- Downgrade of the county's issuer rating (GRT) - Material economic contraction resulting in degradation of gross receipts tax revenue leading to a trend of MADS coverage falling below 2x (GRT)
LEGAL SECURITY
The series 2014A bonds are secured by the county's 3/8th hold harmless gross receipt tax. The series 2014B bonds are secured by the county's first 1/8th and 1/16th gross receipt taxes along with the county's equalization distribution.
PROFILE
Cibola County is located in the western part of the state, along the Arizona- New Mexico border, inclusive of 4,500 square miles and around 27,000 residents. The county seat is Grants, which is 80 miles west of Albuquerque.
METHODOLOGY
The principal methodology used in these ratings was US Cities and Counties published in July 2024 and available at https://ratings.moodys.co m/rmcdocuments/425429. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.co m for a copy of this methodology.
REGULATORY DISCLOSURES
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