KBRA assigns a long-term rating of AA+ with a Stable Outlook to the North Slope Borough, Alaska (the "Borough") General Obligation Bonds, Series 2024A (General Purpose) and General Obligation Bonds, Series 2024B (Schools). KBRA additionally affirms the long-term rating of AA+ with a Stable Outlook for the Borough’s outstanding general obligation bonds.

The long-term G.O. rating remains anchored by a unique mix of attributes: a massive albeit highly concentrated tax base that is projected by the Borough to remain strong over the life of the debt, and a modest but rapidly amortizing debt burden. KBRA also views the Borough’s financial position as strong, bolstered by its favorable operating performance, strict budgetary controls, maintenance of exceptional liquidity, and demonstrated commitment to growing its substantial Permanent Fund. Offsetting the Borough’s reliance on a narrow resource base are its conservative financial management practices and sizable reserves and liquidity, including the aforementioned Permanent Fund, which maintained a balance of $1.113 billion as of June 30, 2024.

The Series 2024A (General Purpose) and Series 2024B (Schools) bonds (the “Bonds”) will be issued to finance the Borough’s FY 2025 capital program. The Bonds are secured by an unlimited ad valorem pledge on all taxable property within the Borough, on parity with approximately $267.92 million of G.O. debt currently outstanding.

Key Credit Considerations

The rating actions reflect the following key credit considerations:

Credit Positives

• History of conservative budgetary management, coupled with established financial management policies and procedures for budgeting, forecasting, and monitoring of financial operations and performance.
• Low debt level when measured relative to the tax base.
• Rapid debt amortization structure, with 74% of principal repaid within five years.

Credit Challenges

• Tax base that is highly concentrated in the petroleum extraction industry, which has experienced declining production for most of the last three decades.

Rating Sensitivities

For Upgrade

• Substantial increase in the Permanent Fund balance.

For Downgrade

• Significant increase in direct or contingent liabilities.
• Shift in debt amortization structure, thus exposing bondholders to uncertainty regarding the long-term trajectory of oil-related assessments.
• Unanticipated substantial decline in the tax base, attributable to assessment litigation or a material decline erosion in values, thus limiting revenue raising flexibility.

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Methodologies

• Public Finance: U.S. Local Government General Obligation Rating Methodology
• ESG Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

Doc ID: 1006144

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