S&P: Dawson County Hospital District, TX GO Debt Downgraded To 'BBB' From 'BBB+' On Declining Liquidity; Outlook Negative
"The downgrade and the negative outlook reflect our view of the district's declining liquidity position coupled with decreasing property values, which have reduced property tax revenues that were already less than sufficient to completely offset lower historical operating margins," said S&P Global Ratings credit analyst Brian Marshall.
The rating reflects our view of the district's:Somewhat limited local economy based on agriculture and petroleum production;Volatile property tax base, which reflects the district's concentration in the oil and gas sector; andChallenged payer mix and modest revenue base. Partly offsetting the above weaknesses, in our opinion, are the district's: History of receiving significant tax-support for operations, coupled with the district's willingness to raise the property tax rate in the event material assessed value (AV) declines; andMarket exclusivity. The district's GO bonds are secured by, and payable from revenue from, an ad valorem tax on all taxable property within the district within the bounds of state statute (75 cents per $100 of AV).
The negative outlook reflects our opinion that there is at least a one-in-three chance of our lowering the rating one notch based on district's uneven financial in recent years coupled with the decline in AV attributed to the exposure to the oil and gas sector. We could lower the rating multiple notches if liquidity continues to deteriorate and financial metrics continue to weaken. We could revise the outlook to stable within our two-year outlook horizon in the unlikely event that we take a substantially positive view of the hospital district's operations based on our health care criteria, and in case of sustained significant tax-base and economic diversification and expansion.