The Santa Clara County Financing Authority received AA-plus ratings from Fitch Ratings and S&P Global Ratings for its $456.35 million series 2026B lease revenue bonds scheduled to price the week of Oct. 12.
Proceeds from the sale will finance capital projects and seismic improvements at several medical facilities across the county.
Santa Clara County
In addition to rating the new issue, Fitch affirmed Santa Clara County's issuer default rating and outstanding general obligation bonds AAA, while affirming outstanding authority lease revenue bonds at AA-plus. S&P similarly affirmed its AAA issuer credit rating on the county and its AA-plus long-term rating on outstanding appropriation obligations, assigning a stable outlook.
In its rating rationale, S&P noted the stable outlook reflects its "view that the county's general fund revenue structure is exposed to shifting federal and state policy priorities, with more downside than upside potential."
Analysts added, restrictions affecting property tax revenue growth mean maintaining credit quality will depend on strategic budgeting choices around spending, including continued general fund support for healthcare operations.
Addressing reserve expectations, S&P analysts wrote: "we anticipate it will maintain reserves near the fiscal 2025 level in the medium term." However, they warned a negative rating action could follow "if budgetary performance significantly deteriorates without what we view as a credible plan for restoring balance."
"This could occur if the county is unable to make further progress in closing the structural budgetary imbalance that came out of federal funding changes," S&P said.
The county doesn't have direct exposure to income and capital gains taxes, S&P analysts said, however, they don't think a downturn in Silicon Valley's economic performance would meaningfully affect the county's credit profile unless it created substantial pessimism that causes assessed real estate values to fall.
Fitch analysts highlighted similar factors regarding rating sensitivity, noting a downgrade could be triggered by a "failure to maintain available unrestricted reserves at or above 17.5% of spending" or if "heightened support of the county's large healthcare hospital system results in ongoing budget pressure and reduced general fund flexibility."
Evaluating the local economy, Fitch pointed to Santa Clara County's vital economic profile as the center of Silicon Valley, home to nearly 2 million people and thousands of technology companies. Analysts noted the county's strong demographic and economic profile "suggests greater capacity to access revenue-generating resources to support governmental costs and fiscal resilience."
