OREANDA-NEWS. S&P Global Ratings revised its outlook on its 'A' underlying rating (SPUR) on Elba, Ala.'s general obligation (GO) warrants to stable from positive.

The rating action reflects S&P Global Ratings' opinion of the city's lack of a trend of available fund balance exceeding $500,000, which only occurred in fiscal 2015.

The rating service also affirmed its 'A' SPUR on the city's GO debt.

"We believe we will likely not change the rating over the two-year outlook period. We, however, could raise the rating if Elba were to exhibit a sustainable trend of improved budgetary performance and very strong budgetary flexibility," said S&P Global Ratings credit analyst Jim Tchou. "We could lower the rating if liquidity were to deteriorate to levels we consider very weak or if there were structural deficits. We could also lower the rating if available fund balance were to fall below $500,000, which we view as nominally low."

The warrants constitute a GO of the city, for the payment of which Elba irrevocably pledges its full faith, credit, and taxing power. The property tax pledge in Alabama is limited, and there are statutory tax limitations that include levies for debt service. Although technically a limited tax, S&P Global Ratings' analysis focuses on the strength of the full-faith-and-credit pledge, which it views as of equal credit quality to an unlimited-tax GO pledge.

Elba's pledge also includes a subordinate-lien net revenue pledge of the water and electric fund; however, S&P Global Ratings rates the series 2011 warrants based on the city's full-faith-and-credit pledge, which the rating service views as the stronger of the two pledges. A fully funded debt service reserve provides additional liquidity support.