North Carolina, Georgia Garvees upgraded two notches to Aa3

North Carolina and Georgia grant anticipation revenue vehicle bonds were upgraded to Aa3 from A2 by Moody's Ratings. Simultaneously Georgia's grant anticipation reimbursement bonds were upgraded to Aa3 from A1.

The outlooks are stable.

The North Carolina upgrade affects $846 million of debt and the action on Georgia affects $375 million.

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"A better credit rating allows the state to accelerate transportation construction timelines at lower cost to taxpayers," said North Carolina State Treasurer Dale Folwell. "It is no surprise the agency praised North Carolina as 'one of the strongest states according to every measure.' … We are proud of the work we do every day at the Department of State Treasurer to maintain shrewd monetary management that helps to maintain our robust economy."

Regarding the North Carolina upgrade, Moody's said, "The upgrade principally reflects the credit strength of the state, as under our revised methodology for rating Garvees the state's Aaa issuer rating became a more prominent credit consideration than it was previously."

Moody's said it expected debt service coverage by pledged federal highway aid grant revenue will remain strong — it was 11 times in 2023. The rating is balanced with the Garvees' credit challenges, including short duration of the federal highway funding reauthorizations and the possibility funding could be disrupted.

"Georgia's (Aaa stable) strong fiscal governance, debt management and ample financial flexibility are key credit considerations, partially offsetting the risk of temporary federal payment disruptions and eliminating the credit distinction between the two debt structures used," the rating agency said.

Fitch Ratings rates the Georgia and North Carolina Garvees A-plus with a stable outlook.