Fitch Ratings said it upgraded to AA from AA-minus $483.7 million outstanding North Slope Borough, Alaska, general obligation bonds and assigns a AA rating to its $95.5 million GOs series 2012.
The bonds are scheduled to sell via negotiation on or about Oct. 18, 2012. The proceeds will fund the borough's ongoing capital improvement program and costs of issuance.
The rating outlook is stable.
The bonds are backed by an unlimited ad valorem tax levy.
The upgrade reflects continued strengthening of the borough's financial profile and continued growth of the underlying tax base.
The borough's financial position is sound, bolstered by a $456 million permanent fund and a large unrestricted general fund balance that equaled 31.6% of spending in 2011. Reserves are expected to rise by about $50 million in 2012.
North Slope Borough is home to the U.S.'s largest oil field in Prudhoe Bay as well as smaller, but significant developed and undeveloped oil and natural gas reserves. Ongoing investment continues to provide a significant taxable assessed value (AV), reaching $17.8 billion in 2012, up 44% from 2007.
The tax base remains highly concentrated and the top 10 taxpayers represent 94.2% of AV. The borough has seen increased activity by smaller oil companies over the years, but it has one of the most concentrated tax bases in the nation.
The borough's oil and gas reserves are nonrenewable and naturally declining resources, but new investments, improved technology and high oil prices have repeatedly pushed out the estimated lifespan of borough oil fields. Significant activity is likely to continue for the foreseeable future.
The borough's debt burden is moderate and declining as a percent of AV at 2.6%. Debt amortizes very rapidly, well within the lifespan of the borough's existing oil fields, and the debt burden is well below its peak in the 1980s.