Independent report analyzes Utah’s general obligation debt, credit rating

By Sun Advocate

Utah is one of seven states considered high quality debtors and receiving triple-A bond ratings.
In addition, a recent report released by Utah Foundation indicates the state achieved the triple-A ranking from both major credit rating agencies.
The independent study examined Utah’s bonded indebtedness from 1990 through 2003, with a primary focus on general obligation bonds, which are typically paid for through general tax revenues.
Major findings of the independent association’s report include:
•Utah general obligation debt grew from $367 million in 1990 to $1.7 billion in 2003.
The majority of the growth came after 1997.
•The state’s debt growth has nearly doubled the amount of budget dedicated to repayment from 1.48 percent of total state spending to 2.82 percent of total spending.
•Almost two-thirds of Utah general obligation bonds issued after 1995 were for transportation projects.
The biggest portion of the GO bonds or $661 million were authorized in 1998 for Interstate 15 expansion.
•Utah remains well under the state’s constitutional debt limit, at 66.9 percent of the designated figure.
However, in the early and mid-1990s, state policymakers kept general obligation debt at generally about one-third of the limit.
•Compared to other states, Utah’s general obligation debt level per $1,000 of personal income is fairly high, ranking 14th highest in the nation.
•Utah’s use of revenue bonds (which are usually paid for with specific non-tax revenues) is slightly below average compared to other states.
•Utah’s triple-A bond rating is primarily the result of the state’s extreme thriftiness in the past, when general obligation bonds were typically paid off in six years.
Higher debt loads and tighter state budgets have led to longer repayment periods on recent bonds, pointed out the independent analysis.
Nevertheless, the rating agencies still consider Utah a low-risk, high-quality debtor.