DALLAS — Moody's Investors Service upgraded Uintah County School District to Aa3 from A1 on Dec. 1, citing growth in northeast Utah's energy-based economy.
The underlying rating applies to a $12.3 million advance refunding expected Dec. 12 and $20.4 million of previously issued debt. Utah enhances the district's bonds with its triple-A state guarantee.
"The Aa3 upgrade reflects the district's sizeable and growing tax base, resident wealth levels that have improved significantly over the past decade, strong financial operations, and a manageable debt burden," Moody's analyst Travis George wrote. "The rating also incorporates the concentrated nature of the district's tax base and local economy, which are largely driven by the oil and gas industry."
The district serves an estimated population of 35,555 in the Vernal City area. Natural gas and oil drive the local economy, with large employers such as Halliburton Energy Services, Anadarko Petroleum Corporation, and Baker Hughes Oilfield Operations. The 10 largest taxpayers, which are all energy industry participants, comprise 45.4% of the district's 2014 assessed value.
"While Uintah County's concentration in the oil and gas sector remains a risk, current expectations are for continued significant growth through at least 2030," George said. "Based on a comprehensive study conducted by the State of Utah, oil and gas production could more than double between 2014 and 2030."
According to the United States Geological Survey, the Uintah Basin is estimated to contain a total of 1.32 trillion barrels of resources in place, making it one of the richest oil shale deposits in the world.
However, falling oil prices have raised doubts about the viability of some U.S. production from horizontal wells that use hydraulic fracturing of tight shale formations. As prices dropped in October, Halliburton and Baker Hughes announced that they were merging, a move that is expected to reduce employment in the oil patch. For producers, hedging means that the effects of lower prices may not be felt immediately.
In addition to its approximately $38.7 million in outstanding general obligation debt, the UCSD also has $14.2 million in outstanding lease revenue bond debt issued by the Municipal Building Authority. The lease payments associated with these bonds amount to roughly $1.6 million annually and are paid from the capital levy dollars generated in the Capital Projects Fund.
"Because of this payment source, and while essentially a General Fund obligation, this debt is not expected to ever be a burden on the General Fund," George said. "The district has no plans to issue additional debt as it intends to finances its future capital projects with cash. All of the district's debt consists of fixed-rate debt."
