Fitch upgrades Jefferson County, Ala., issuer default rating to AA-minus

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Fitch Ratings said on Thursday that it raised Jefferson County, Ala.’s issuer default rating and the ratings on the county’s $51 million of Series 2018 A and C general obligation warrants and $338.9 million of Series 2017 limited obligation refunding warrants to AA-minus from A.

Fitch said the rating outlook is stable.

Fitch's said its upgrade of the county's IDR to AA-minus/stable from A/stable “reflects material improvement to the county's gap closing capacity due both to increases in reserves as well as improved expenditure flexibility. The rating continues to consider the county's inability to raise revenues independently and exposure to the historically troubled sewer system (rated BB-plus/stable).”
At the same time, Fitch assigned an AA-minus rating to the county’s $111.2 million of Series 2018A GO refunding warrants and $26.9 million of Series 2018B GO refunding warrants (delayed delivery). The series 2018 warrants are scheduled for sale the week of May 23. Proceeds will be used to refund the county's existing GO warrants for net present value savings, as well as to pay issuance costs.

The GO warrants are general obligations of the county supported by its full faith and credit.

The 2017 sales tax warrants are limited obligations of Jefferson County payable from a first lien on a one-cent county-wide sales and use tax levied broadly on the retail sale of tangible personal property sold in the county by businesses located in the county, and is collected by the county.

The rating on the limited obligation sales tax warrants is capped by the county's IDR. The upgrade of the IDR allows for an upgrade of the rating on the warrants. The rating on the warrants is also based on a dedicated tax analysis that considers the 1% special sales tax's strong cushion against potential declines in pledged revenues and restrictive additional bonds test that prohibits new money issuance. The sales tax warrants are highly resilient to fluctuations in pledged revenue.

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