Oregon's revenue, reserve strength cited by analysts as it heads to market

Oregon Governor's Office

Oregon had its AA-plus bond rating and positive outlook affirmed by Fitch Ratings ahead of plans to issue $626 million in debt.

The rating agency assigned on Wednesday AA-plus ratings to the tax-exempt bonds.

BofA Securities will price the bonds in three series: $246.8 million GO bonds 2025 Series E, $183.3 million GO bonds 2025 Series F, and $196 million GO bonds 2025 Series G.

The $246.8 million tranche will help fund the I-5 bridge replacement project, while the other two series will fund projects for the state's universities and community colleges and refund outstanding debt.

Oregon received $600 million in federal money in December 2023 to help support the long-planned reconstruction of the Interstate 5 bridge that connects Portland to Vancouver, Washington.

The AA-plus issuer default rating and GO ratings were driven by "the state's strong revenue and spending control, low liabilities and prompt actions to maintain financial flexibility during challenging revenue periods," Fitch said.

Fitch had elevated the outlook to positive last year, because the state is on track to achieve and sustain material increases in gap-closing capacity as its two reserve funds, the Education Stability Fund and the Rainy Day Fund, have continued to grow. The state projects $2.9 billion in reserves by the end of the 2023-25 biennium.

Moody's Ratings assigned an Aa1 rating and S&P Global Ratings a AA-plus rating. Both assigned stable outlooks.

The state's coffers and economy have benefited from diversification, described in an online investor presentation as a transformation from a dependence on timber harvesting and wood products manufacturing to growth in business and health services and high-tech manufacturing.

Oregon's fiscal 2023–2025 biennium "saw record revenues and reserves, with significant personal income tax and corporate income tax growth," according to Fitch.

The governor's proposed fiscal 2025–2027 budget "anticipates a 29% revenue increase, maintaining funding for key programs," Fitch said. "Oregon's labor market recovery lags the national trend, but overall economic performance remains strong."

The state has achieved steady economic gains in recent years due to its more diversified economy and growing population, with technology and manufacturing sectors showing particular strength, Fitch analysts said.

But the state remains vulnerable to economic volatility and disruptions to international trade during recessionary periods, they said.