KBRA assigns a long-term rating of AA+ to the North Slope Borough, AK General Obligation Bonds, Series 2025. KBRA additionally affirms the long-term rating of AA+ for the Borough's outstanding general obligation bonds. The rating Outlook is Stable.

Key Credit Considerations

The rating action reflects 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.
• Extremely rapid debt amortization; approximately 73% of proforma principal paid within five years.
• Low debt level when measured relative to the tax base.
• Strong liquidity, largely supported by the Permanent Fund with a long history of limited draws, coupled with well-funded pensions.

Credit Challenges

• Tax base that is highly concentrated in the petroleum extraction industry. While this industry has experienced declining production for most of the last three decades, recent developments may alter this course.
• The concentrated tax base introduces volatility and various risks that may be beyond the Borough’s ability to control, including geopolitical risk, corporate directives, and political and environmental decisions.

Rating Sensitivities

For Upgrade

• Over the longer term, significant growth and diversification of the tax base.
• Increased operating flexibility resulting from a material increase in available, debt paying resources and/or development of new revenue streams mitigating current industry concentration risks.

For Downgrade

• Significant increase in direct or contingent liabilities.
• Shift in debt amortization, 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 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), one of the major credit rating agencies (CRA), is a full-service CRA 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 (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1011803

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