OREANDA-NEWS. S&P Global Ratings lowered its underlying rating (SPUR) on Anniston Public Building Authority, Ala.'s series 2011 building revenue bonds to 'A+' from 'AA-' following a review where S&P Global Ratings discovered an error in the application of its criteria. The outlook is stable.

In previous reviews, S&P Global Ratings incorrectly applied its local GO criteria to these bonds when it should have analyzed them based on the application of its appropriation-backed obligations criteria, published June 13, 2007, on RatingsDirect. These bonds should have been analyzed under the appropriation criteria due to the annual appropriation risk inherent in the lease-backed structure that secures the bonds.

The series 2011 bonds are a special limited obligation of the public building authority, payable solely from, and secured by, a pledge of rentals and other receipts derived by the authority from the leasing of the project. S&P Global Ratings rates these obligations under its appropriation-backed obligations criteria and notches the rating one notch off the GO debt rating.

In conjunction with the rating correction on the series 2011 bonds, S&P Global Ratings also assigned its 'AA-' rating and stable outlook to Anniston, Ala.'s $8.465 million series 2016 general obligation (GO) warrants and affirmed its 'AA-' long-term rating, with a stable outlook, on the city's existing GO debt. The series 2016 warrants are a GO of the city, for which the city has pledged its full-faith-credit-and-taxing power to repay the warrants.

The series 2016 warrants are a GO of the city, for which it will use its full-faith-credit-and-taxing-power irrevocable pledge to repay. While the security is technically a limited tax, S&P Global Ratings' analysis focused on the strength of the full-faith-and-credit pledge, which it views of equal credit quality to the unlimited-tax GO pledge.

Officials intend to use series 2016 warrant proceeds to refund a portion of the city's series 2011 bonds for debt service savings.

"We do not expect to change the rating during the two-year outlook period. However, we could lower the rating if budgetary pressure, caused by the city's pension systems, or overall financial deterioration were to result in a further weakening of budgetary flexibility or the debt and contingent liabilities profile," said S&P Global Ratings credit analyst Alexander Laufer. "We could raise the rating if economic expansion were to result in improved wealth and income commensurate with the city's higher-rated peers, coupled with the restoration of very strong reserves above its informal target and the overall stabilization of the pension system."

The stable outlook reflects S&P Global Ratings' opinion that Anniston will likely continue to budget effectively to maintain adequate budgetary performance and strong reserves despite challenges due to rising pension contributions.