Fitch Ratings has affirmed the 'AA+' rating on the following Athens-Clark County Unified Government, GA (ACC) outstanding revenue bonds:

--$189.8 million water and sewerage revenue bonds, series 2015.

Additionally, Fitch has assessed the Standalone Credit Profile (SCP) of the system at 'aa+'.

The Rating Outlook has been revised to Positive from Stable.

ANALYTICAL CONCLUSION 

The 'aa+' SCP assessment and 'AA+' bond rating reflect the unified government's water and sewer system's (the system) 'aaa' financial profile in the context of its 'a' revenue defensibility assessment and low operating risk profile, assessed at 'aa'. Net leverage of 2.7x for fiscal 2019 is low, having declined over the last five years from 5.8x in fiscal 2015. The Positive Outlook reflects Fitch's expectations that net leverage should remain around current levels over the forward look, which would warrant an upgrade of the credit. However, the Outlook could move back to Stable if extended university distance learning relating to the coronavirus is prolonged, as this would be expected to result in lower funds available for debt service (FADS) and an increase in net leverage. 

Coronavirus Considerations

The recent outbreak of coronavirus and related government containment measures worldwide creates an uncertain global environment for the Water and Sewer sector. ACC reports that the system's financial performance has not been significantly hampered despite the closure of the University of Georgia and other businesses, with large cash balances available if necessary. Fitch's ratings are forward-looking in nature. Fitch will monitor developments in the sector as a result of the virus outbreak as it relates to severity and duration, and incorporate revised expectations for future performance and assessment of key risks as appropriate. 

CREDIT PROFILE 

ACC, a unified government since 1991, is located approximately 65 miles northeast of Atlanta and is anchored by the University of Georgia. The water and sewer systems serve about 33% and 23%, respectively, of the county's population. The system is highly concentrated, with the top ten users comprising a significant 26% of fiscal 2019 operating revenues, including 12% from Pilgrim's Pride (poultry manufacturing) and 10% from the university.

ACC owns and operates one water treatment plant and three water reclamation facilities. The system's water supply, derived from both the North Oconee and Middle Oconee Rivers, is ample and expected to be sufficient through at least 2040. 

KEY RATING DRIVERS

Revenue Defensibility 'a'

Favorable Service Area Characteristics, Limited Rate FlexibilityThe revenue defensibility assessment reflects ACC's favorable service area characteristics as a university center despite weaker area wealth levels in comparison to the national median. Rates are elevated but this is also due in part to the concentration of university students.

Operating Risks 'aa' 

Very Low Operating Cost Burden and Facility Age

The operating risk assessment factors in the system's very low operating cost burden and low life cycle investment needs. Capital spending has historically lagged depreciation but is expected to accelerate in the next few years, likely allowing the life cycle ratio to remain well below 45%.

Financial Profile 'aaa' 

Very Strong Financial Profile 

At 2.7x, ACC's net adjusted debt to adjusted funds available for debt service (net leverage) in fiscal 2019 reflects a very strong financial profile. Net leverage is expected to be maintained around this level throughout the forecast period, with no anticipated debt issuances planned. Healthy cash balances lend further support to the financial profile. 

ASYMMETRIC ADDITIVE RISK CONSIDERATIONS 

No asymmetric additive risk considerations affected this rating determination. 

RATING SENSITIVITIES 

Factors that could, individually or collectively, lead to positive rating action/upgrade:

--Continued and expected net leverage below 4x on a sustained basis. 

Factors that could, individually or collectively, lead to negative rating action/downgrade:

--Weakening in the leverage to above 4x on a sustained basis;

--Deterioration in service area characteristics or rate flexibility that ultimately lower the revenue defensibility assessment;

--Extended capex below annual system depreciation causing a rise in the life cycle ratio above 45% could lower the operating risks assessment;

--Deterioration in the county's credit quality could constrain the rating.