Fitch Ratings said it has upgraded to AA from AA-minus Clearfield, Utah's $1.2 million sales tax revenue bonds series 2003 and implied general obligation bonds
The rating outlook is stable.
The bonds are secured by a first lien on Clearfield's sales and use tax revenues. The tax is currently levied at the maximum allowable rate of 1.00% on all taxable sales of goods and services.
The upgrade reflects economic strengthening, an increase of the statutory general fund balance cap to 25% of revenues from 18%, and outperformance of the city's financial operations compared to prior expectations.
The city's financial profile is sound, exhibited by six consecutive years of structural general fund surpluses, good expenditure flexibility, solid fund balances, and prudent management practices. Offsetting these strengths, a large proportion of general fund revenues derive from economically cyclical sales tax revenues.
The AA sales tax revenue bond rating is limited by the city's general credit quality to reflect the potential for a disruption in pledged revenue in the unlikely event of the city's bankruptcy. Pledged revenue provides strong estimated maximum annual debt service (MADS) coverage of 2.74x in fiscal 2014, there are no plans for further parity issuances, and leverage is restricted by a 2.0x MADS additional bonds test (ABT).
The local economy is concentrated in a large air force base and industrial enterprises, but the city benefits from its location within the broader Davis and Weber county employment markets, which are fairly well diversified. The city has experienced significant improvements to its employment and poverty levels over the past few years, though income levels continue to lag the state and nation.
