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ESG U.S. Public Finance Report Card: Mountain States

In this report, S&P Global Ratings analyzes the environmental, social, and governance (ESG) credit factors for select U.S. public finance (USPF) government and not-for-profit enterprise issuers in the Mountain States (including Arizona [AA/Stable], Colorado [AA/Stable], Idaho [AA+/Stable], Montana [AA/Stable], Nevada [AA+/Stable], New Mexico [AA+/Stable], Oklahoma [AA/Stable], and Utah [AAA/Stable]). The list of entities highlighted in this report is not exhaustive but rather broadly illustrative of the region's key ESG risks and opportunities and our view of where issuers across different sectors are positioned relative to those risks and opportunities. Beginning April 2020, S&P Global Ratings incorporated a summary paragraph in all issuer-level credit reports describing their comparative ESG risks and opportunities. Select ESG summary paragraphs from issuers within these states are reproduced in the Appendix to this report.


ESG In Credit Ratings

ESG risks and opportunities can affect an entity's capacity to meet its financial commitments, including debt service. S&P Global Ratings incorporates ESG considerations into its ratings methodologies and analytics, which enables analysts to integrate the qualitative and quantitative effects throughout our credit analysis. (see "Through The ESG Lens 3.0: The Intersection Of ESG Credit Factors And U.S. Public Finance Credit Factors," published March 2, 2022, on RatingsDirect, and "Environmental, Social And Governance Principles in Credit Ratings," Oct. 10, 2021).

Our ESG report cards qualitatively explore the relative exposures (average, below, elevated) of UPSF issuers to ESG credit factors over the short, medium, and long term. Comparisons of ESG risks and opportunities are not an input to our credit ratings; rather, they are descriptors reflecting what is already incorporated into our current forward-looking opinion of credit risks. This report card lists ESG insights for select governments and not-for-profit entities, including how and why ESG factors may have had a more positive or negative influence on an entity's credit quality compared to sector peers or the broader sector. These comparative views of ESG factors are qualitative and established by analysts during analytic discussions and described in issuer-level credit reports, with the goal of providing more insight and transparency.

Environmental - Elevated

Major trends affecting a population of over 29 million across the Mountain States include extreme weather events, water resource management, and economic dependence on fossil fuels. The map below shows the occurrence of these across the states.


USPF governments and not-for-profit enterprises in the Mountain States region have exposure to extreme weather occurrences, including wildfires (Arizona, Colorado, and Montana), drought (Arizona, Colorado, New Mexico, Nevada, and Utah), and isolated flooding in Colorado communities. Although we view some portions of this region as having environmental risks above those of the sector, the risk could vary depending on an entity's location.

Physical risks.  Unlike some severe climate-related events, wildfires are highly unpredictable in both magnitude and duration and this can exacerbate the extent of damage they cause or present challenges to the entities' preparedness. Historically, most wildfires have occurred in rural areas and remote parts of states without substantial residential or commercial development. However, they have recently spread to more populated areas. Municipalities, not-for profit enterprises, and other governmental entities in these areas face higher physical risks from wildfires compared to those in more developed, major metropolitan areas. While most rated entities in areas of high wildfire risk have not been substantially affected to date, we believe there could be long-term credit risk factors for some. These risks could include damage to significant portions of the tax base or infrastructure as well as higher costs for entities or increased insurance costs for the tax base compared to other areas.

While effects of extreme high temperatures in the desert Southwest are less severe than wildfires, occurrences have been more widespread and frequent in recent years. In the long term, extreme high temperatures could result in disruptions to economic potential due to loss of productivity and higher operating costs.

Exposure to potential physical climate risks identified in our analysis also takes into account adaptation efforts that materially reduce the physical risk. Various entities stepped up resilience and adaptation plans to help mitigate the elevated risk. We believe through regional planning, infrastructure initiatives, and other adaptation efforts, the region can help buffer residents, preserve economic bases, and protect municipal facilities from the effects of climate change. Nonetheless, some entities are more exposed in the region.

Natural capital.  Given its location, we believe parts of the region face elevated natural capital risks due to inherent water supply scarcity. In particular, some highly populated parts of the region, including Las Vegas and Phoenix, rely on the Colorado River water supply, which remains susceptible to drought and climate change. As unprecedented drought and growing demands have caused flows on the river to drop dramatically, storage levels in the system's two largest reservoirs--Lake Mead and Lake Powell--have also declined. Over the near term, water system utility managers may face critical water supply decisions, potentially resulting in massive capital investments, such as whether to proceed with a $3.4 billion Regional Recycled Water Project, which, while costly, we would consider favorable from an environmental stewardship perspective and as a long-term water supply option. We note, however, significant water resource long-term planning by states that could mitigate long-term effects of drought if implemented successfully. Examples include Arizona's 100-year assured water supply program and the significant groundwater banking programs managed by the Arizona Water Banking Authority.

Typically, a single year of dry weather is manageable for most local governments, municipal utilities, and irrigation districts in the West, as water infrastructure--e.g., surface water reservoirs and groundwater basins--can buffer the effects of short-term droughts. However, prolonged drought conditions become increasingly challenging as carryover water supplies in reservoirs are depleted and groundwater basins are over-drafted. These conditions have the potential to create changes in credit quality for debt obligations backed by user revenues, such as utility systems, as well as tax-backed bonds. (see "Could The Western U.S. Drought Threaten Municipal Credit Stability?," published Aug. 18, 2021)

Climate transition risk.  Additional exposure for some Mountain States (e.g., Montana, New Mexico, Oklahoma, and Wyoming) include economic dependence on fossil fuels, including coal, oil, and natural gas, which could be subject to global and federal environmental regulations and renewable energy trends. For certain communities in Colorado, oil reserves are a significant contributor to the local economy, as well as finance resources reflected as moderate exposure within our credit rating analysis. Oil- and other mineral-producing dependent entities face ongoing risk from increasing regulations of carbon emissions and an accelerating energy transition to renewable energy. Over time, we expect these evolving credit risks to exert negative pressure on state operating environments.

Social - Neutral

Social capital.  We view the region's exposure to social capital risks as neutral when compared to other regions in the U.S. While demographic trends exhibit growth that exceeds the U.S., there are costs associated with expanding services, building infrastructure, and requirements for personnel (e.g., teachers) to support a larger scope of operations. Budgetary pressures could arise should costs accelerate more quickly than economic and revenue growth.

Most of the Mountain States continue to show stronger population growth than the rest of the nation (see chart 2). This growth reflects strong in-migration trends.

Table 1

Population Growth In The Mountain States
Mountain States Population (2020) Ten-year growth (%) Population growth (2020) (%) Relative to the U.S.
Arizona 7,421,401 1.48 1.78 Stronger
Colorado 5,807,719 1.41 0.85 Stronger
Idaho 1,826,913 1.52 2.12 Stronger
Montana 1,080,577 0.87 0.98 Stronger
Nevada 3,138,259 1.51 1.54 Stronger
New Mexico 2,106,319 0.20 0.32 Weaker
Oklahoma 3,980,783 0.57 0.51 Stronger
Utah 3,249,879 1.59 1.45 Stronger
Wyoming 582,328 0.31 0.38 Weaker
Average growth for the region 29,194,178 1.05 1.10 Stronger
U.S. average 328,239,523 0.63 0.35
Source: EDS.

With many coastal and urban areas increasingly pressured by a high cost of living, the appeal of more affordable housing, and increased economic potential underscored the strong population increases for the Mountain States with an average growth in 2020 of 1.1% across the region compared the 0.35% for the U.S. Prior to the onset of the pandemic and temporary economic weakness stemming from COVID-19, the Salt Lake City and Denver metropolitan statistical areas (MSAs) continued to add jobs in high-wage, information-based industries at a rapid pace. As the region continues to attract new residents, we expect steady growth in the professional services, hospitality, and leisure sectors to support economic and revenue performance, while the ability to factor growth and aging infrastructure into long-term financial plans could become increasingly important to credit quality.

Additionally, we believe that the strong growth in these states could be tempered in the long term by significant price appreciation in housing stock, particularly in the urban areas. While the S&P Case-Schiller index reports the U.S national home-price annual growth for 2021 was 18.8%, the Denver and Phoenix MSAs experienced much faster growth at 20.3% and 32.5%, respectively.

While population trends have been strong in the region, the age-dependency has shown more tepid trends compared to the U.S., with average total dependent population at about 65.3% compared to 63.1% nationally. However, unlike those in aging regions like the Northeast, a significant part of the dependent population reflects younger residents (below 16) due to in-migration of young families and larger family sizes. While a dependent population based on young people could lead to different challenges than serving older residents, over the long term, it could help with economic diversity and growth if the trends translate into a larger workforce population compared to the U.S. as a whole. These growth fundamentals, particularly given a younger insured population, are favorable for areas like education (public and private K-12 and higher education) and health care, which result in steady demand for enrollment and health care services.

Our recent research reflects more positive long-term trends in age dependency in the region (see "Increasing Generational Dependency Poses Long-Term Social Risks To U.S. States' Fiscal And Economic Stability," published Feb. 24, 2020). In the map below, we illustrate "old-age dependency ratio" or the number of persons age 65 and over divided by the labor force (age 15 to 64) as defined by the Organization for Economic Cooperation and Development. The map shows the projected trend in old-age dependency ratios over the next two decades based on IHS Markit Data.


Health and safety.  The health and safety social risks stemming from the pandemic cut across USPF asset classes in the Mountain States through reduced economic activity from stay-at-home orders, restrictions on domestic and international travelers, work-from-home requirements, financial liabilities associated with closing college campuses, and cancelation of elective surgeries at hospitals to preserve capacity to serve a surge in patient demand from the virus. With U.S. progress with vaccination efforts and substantial federal stimulus funding, health and safety risks incorporated into our credit analysis have largely abated. However, as the omicron variant demonstrated, disruptions can still occur and lead to temporary setbacks in economic recovery.

Governance – Neutral

We generally view governance risk for USPF governments and not-for-profit enterprises in Mountain States as neutral in our credit analysis. In some cases, governance risks have been mitigated such as in Colorado, where we believe relatively weaker funding for pension liabilities could pressure credit quality, but the state has attempted to address this challenge by adopting reforms likely to improve its pension funded ratio over time. Such measures suggest strong risk management, culture, oversight governance.

Governance structure.  The Mountain States, except for New Mexico, have a process by which citizens may request that new laws be passed either through direct ballot initiatives or through the legislature. While this may introduce additional hurdles to budgeting and the revenue-raising framework of governments, we believe that most rated entities in the region have instituted management policies to account for these limitations.

State support for local governments under extreme fiscal or unusual distress is captured in the system support aspect of our Institutional Framework and is varied across Mountain States. While we consider Nevada and New Mexico as having strong system support for their local governments, we believe that such system support in Arizona, Idaho, and Oklahoma is weak.

Transparency and reporting.  Colorado and Oklahoma municipalities are not required to provide annual audits, which could exhibit heightened exposure to governance risks due to reporting and transparency. States with more lax requirements for smaller local governments to produce audited financial statements are captured in the transparency aspect of our Institutional Framework. We review these scores annually and the score is "very weak" for certain municipalities within the state. More information on Institutional Framework scores is available in our "2021 Update Of Institutional Framework For U.S. Local Governments" (Oct. 11, 2021).

Table 2

ESG Risks And Opportunities: Selected Paragraphs From The Most Recently Published Issuer-Level Reports
Obligor State Rating Sector ESG Paragraph
Central Arizona Water Conservation District Arizona AA+/Stable Municipal Utilities We believe the key risk and rating driver continues to be environmental, specifically water stress. The Phoenix and Tucson MSAs remain economically resilient, and prior to COVID-19 had even surpassed pre-Great Recession key economic indicators such as median home value and employment levels. The steady population growth, and that the Colorado River basin has suffered almost continuous drought conditions for about two decades and counting, led to a landmark 2019 agreement among the seven states that share the watershed. The agreement does not amend, but does build upon the original compact that manages and allocates water among the states. The agreement establishes a path to curtail water deliveries--based on hydrological conditions and reservoir levels--through at least the middle of the decade in order to lessen drought stress on Lakes Mead and Powell that is being exacerbated by climate change. The spring 2020 inflow to Lake Powell, for example, was only 52% of the 30-year historical average. Based on projections using current lake elevations, management estimates that curtailments are possible by 2023, even with the 2019 drought-contingency measures reducing demand. CAP customers, in general, are already very efficient in their consumptive use, with embedded water conservation programs for municipal and industrial customers and water-efficient infrastructure irrigation common among agricultural users. Because of the forward-looking nature of management and the willingness to incorporate preparedness in its operational and financial scenario building, we view governance of the district as generally better than that of peers. Social risk management, especially for health and safety risks related to COVID-19 as well as sensitivities toward affordability to the ultimate retail customers, in our view, are in line with those of peers. Management has represented that the pandemic has not affected the district's finances, nor its customers' ability to pay their CAP obligations on time and in full.
Las Vegas Valley Water District, Nevada Nevada AA/Stable Municipal Utilities In our opinion, management has strong governance, demonstrated by transparent communication with its communities and robust long-term strategic and financial planning. Given its location in Southern Nevada, we believe the district faces elevated environmental risk as a result of the region's inherent water supply scarcity. In particular, the district's Colorado River water supply, which the authority manages and which is stored in Lake Mead, remains susceptible to drought and climate change. To offset hydrological risk and help meet future demands, on behalf of its members, the authority has expanded its water banking efforts to include storage in the Arizona Water Bank and the California Water Bank, as well as in Lake Mead. The authority has banked water resources of more than 2 million acre-feet, compared with its consumptive use of 256,000 acre-feet in 2020, which is beneficial from a resiliency perspective. Nevada's Colorado River consumptive use in water year 2021 is projected to be approximately 242,000 acre-feet. We also recognize that the district recycles nearly all its indoor water use, either through return-flow credits or direct reuse. Return-flow credits help extend Colorado River resources beyond Nevada's allocation. We expect the district will continue to benefit from the authority's Colorado River Basin governance over the next decade, given the importance of a regional approach to water supply management. This includes efforts such as the voluntary drought contingency plan, an interstate agreement to help preserve critical reservoir levels.
Lehi City Utah A+/ Stable Public Power In fiscal 2020, about two-fifths of the electric system's power came from coal- and natural-gas-fired generation. With this amount of fossil fuel generation, we believe that the electric system faces moderate but not significant exposure to future carbon emission regulations. Regarding social factors, health and safety precautions that health officials enacted in response to the COVID-19 pandemic have not resulted in a decline in demand for utility services. However, we remain watchful of the pandemic's impact on the electric system and its customers. S&P Global Economics forecasts that U.S. GDP will decline by 3.9% in 2020. (See "Staying Home For The Holidays," published Dec. 2, 2020, on RatingsDirect.) Reports that at least two experimental COVID-19 vaccines are highly effective, and that one has gained initial approval in the U.S., are promising, but this is merely the first step toward a return to social and economic normality; equally critical is the widespread availability of effective immunization, which could come by the middle of 2021. For governance, the electric system has rate-setting autonomy, which is standard for the sector.
Salt Lake City international Airport Utah A/Stable Transportation We analyzed SLC's risks and opportunities related to environmental, social, and governance credit factors relative to its market position, management and governance, and financial performance. While conditions are improving, the airport has been, and remains, exposed to health and safety social risks associated with the pandemic and weaker traffic levels that resulted in significant operating and financial pressures. We analyzed the airport's risks related to environmental and governance factors and consider them to be in line with our view of the standard for the airport sector. We will continue to evaluate these risks as the situation evolves.
Oklahoma, State of Oklahoma AA/Stable States We view Oklahoma's environmental risks as elevated based on climate transition risks, which we view as a moderately negative influence on the state's credit profile. Oklahoma has a higher penetration of carbon-intensive oil and natural gas production within its economic profile compared with other U.S. states. A shift in U.S. climate policy and global demand to reduce carbon-intensive energy production and transition to renewable energy could reduce mining employment (approximately 1.9% of the state's employment composition, but 4.75x above the U.S. average in 2020) and gross state product (GSP; approximately 12% of state GSP in 2020). While direct gross production taxes comprise just 6% of the state's general revenue, income and sales taxes exhibit sensitivity to declines in mining sector activity, given that income from oil and gas production trend above average personal income for the rest of the state. However, Oklahoma's economic diversification efforts, including its ranking as the third-leading state in the U.S. for wind energy production, and longstanding constitutional and budget management requirements help alleviate additional financial pressures within our credit rating analysis. At the same, we view its social and governance risks as being in line with the sector and Oklahoma has historically maintained a stable management and policy framework to respond to developing risks
Public Finance Authority (Nevada State College Student Housing Revenue Bonds) Nevada BB-/ Watch Neg Higher Education The downgrade and CreditWatch placement reflect our opinion of the operating and financial risk that faces NSC housing due to COVID-19 through construction delays and very weak preleasing activity. NSC's management team plans to primarily deliver instruction through remote learning in fall 2020 to protect the health and safety of students and limit the social risk associated with the community spread of COVID-19, which has led to significantly weaker-than-projected preleasing activity. We view the risks from COVID-19 to public health and safety as a social risk under our ESG factors. Despite the elevated social risk, we believe the project's environmental and governance risk are in line with our view of the sectors as a whole.
Vail Mountain School (VMS). Colorado BBB-/ Stable Independent Schools We view the risks posed by COVID-19 to public health and safety as an elevated social risk for the independent school sector under our environmental, social, and governance (ESG) factors. We believe this is a social risk for the school, should local demand preferences shift toward home-school options, potentially affecting enrollment trends, which could affect financial operations. However, we note the school has shown resilience thus far through the COVID-19 pandemic. Despite the elevated social risk, we believe VMA's environmental and governance risks are in line with our view of the sector as a whole.
Sage International School of Boise Idaho BB+/ Stable Independent Schools We view the risks posed by COVID-19 to public health and safety as an elevated social risk for the charter school sector under our environmental, social, and governance (ESG) factors due to potential impacts on per pupil funding beyond the near-term support provided by additional federal relief, or if local demand preferences shift toward home-school options amid the emergence of COVID-19 variants, potentially affecting enrollment trends, which could influence per pupil funding as a major revenue source for the school. For Sage, this risk has been somewhat mitigated by steady enrollment trends, coupled with increased funding from the state on a per pupil basis for fiscal 2022, and further expectations of increased funding for fiscal 2023. We believe the school's environmental and governance risks are in line with our view of the sector.
Utah Housing Corp Utah AA-/Positive Housing We have analyzed UHC's environmental, social, and governance risks relative to its financial strength, management and legislative mandate, and the local economy. We view health and safety risks related to the COVID-19 pandemic as social risks, which have affected most affordable housing issuers and housing projects. Elevated unemployment and the greater likelihood of nonpayment of rent and mortgages, as a result, could create a liquidity crunch for some issuers and elevate near-term social risk. However, we think UHC's consistently strong financial performance and growing equity somewhat insulate it from near-term volatility resulting from COVID-19. As vaccine rollouts continue in the U.S., S&P Global Ratings believes uncertainty remains high about the evolution of the coronavirus pandemic and its economic effects. Widespread immunization will pave the way for a return to more normal levels of social and economic activity. As the situation evolves, we will update our views. We believe governance and environmental risks for UHC are both in line with the sector standard.
Phoenix Arizona AAA/ Stable LG We analyzed the city's ESG risks relative to its economy, financial measures, and debt profile. We believe that the city's governance risk factors are in line with our view of the sector as a whole. Our rating incorporates our view regarding the health and safety risks posed by the COVID-19 pandemic, albeit temporary. Absent the implications of COVID-19, we consider the city's social risk to be in line with our view of the sector standard. Finally, the city has elevated exposure to drought, though we acknowledge the state's efforts to secure water rights from various sources to support its growing population, and extreme heat, which could pressure officials' efforts to support lower-income populations in peak summer temperatures. At the local level, the city has implemented various programs to aid in ESG-risk mitigation, including its urban heat program for shade and walkshed mapping, and its continued focus on water conservation and sustainability
Nevada System of Higher Education Nevada AA-/ Negative Higher Education The outlook revision reflects our opinion of the operating pressure the system faces stemming from the significant state funding cut in fiscal 2021 as a direct result of the COVID-19 pandemic. We view the risks posed by COVID-19 to public health and safety as a social risk under our ESG factors. In our view, higher education entities face elevated social risk due to uncertainty on the duration of the COVID-19 pandemic and the uncertainty around its total effect on the system's operations. Due to the pandemic, NSHE's management team moved to implement remote learning in spring 2020 and is currently operating primarily remote instruction for the academic year to protect the health and safety of its students, faculty, and staff, and limit social risk associated with the community spread of COVID-19. Despite elevated social risk, we consider the NSHE's environmental and governance risks in line with our view of the sector.
Canadian County Independent School District No. 69 (Mustang), Oklahoma Oklahoma AA/ Negative Local Governments We believe that the district's socials risks are elevated given the health and safety risk posed by the COVID-19 pandemic, which we believe could pressure budgets in the short term. We also analyzed the district's environmental and governance risks relative to its economy, management, financial measures, and debt and liability profile and determined that all are in line with our view of the sector standard.
Colorado, State of Colorado AA/ Stable States We view the environmental risks for Colorado as elevated given the potential wild fire risks, occurrence of droughts in the state, and its reliance on the Colorado River. The state has experienced recent declines in water levels despite a fast-growing population. As it continues to attract new residents, we expect the state to factor this growth into it's long-term plans. Absent the implications of COVID-19, we consider Colorado's social factors to be stronger relative to the sector given its strong demographic trends compared with the nation, specifically continued significant population growth and a lower dependent population. Colorado's weak pension funding is a governance risk that could impair its credit quality. However, the state has recently adopted reforms, which it expects will improve its pension funding over time.
Intermountain Healthcare Inc. Utah AA+/Stable Healthcare In our view, Intermountain's management and governance focus on continuous improvement as well as a forward-looking, innovative, consumer-oriented, and cost-sensitive culture form the foundation for Intermountain's credit strengths and successes and reflect less governance risk relative to peers in the sector. This governance strength is also reflected in Intermountain's philosophy to retain ample balance sheet flexibility, which protects the organization during uncertain times. We also believe that Intermountain's social risks are lower relative to peers by virtue of its locations in a broadly diversified region with strong population and employment growth as well as its market position in Utah as the provider of choice for slightly over half of the state's population. Together, these strengths, as well as Intermountain's integrated strategy, with a natural hedge between provider and health plan performance, contribute to the organization's stable and robust earnings and cash flow and successful navigation through the pandemic. We view environmental risk as in line with peers.
Riverton, UT Utah AA/ Negative Municipal Utilities We view the system's governance factors slightly weaker than other similarly rated utilities. The rating action reflects financial practices that were overly optimistic that led to a rate covenant violation in fiscal 2020. We anticipate the council will approve a corrective rate plan that will establish a clear trajectory for future financial performance. If future economic assumptions remain aggressive and constrain operating margins, it will likely pressure the rating. In our view, generally, the city's water system has reasonably incorporated key environmental vulnerabilities into its risk and asset management planning. The city has substantially met regulatory requirements for environmental compliance and has ample water supply and capacity in its existing facilities to meet growth needs. The city's asset management is transitioning to ongoing repair and replacement type projects to maintain system assets in good condition. Although there have not been any limitations on water demand in the service area, we believe there are increased public health and safety risks due to the pandemic. S&P Global Ratings believes there remains a high degree of uncertainty about the evolution of the coronavirus pandemic. Reports that at least one experimental vaccine is highly effective and might gain initial approval by the end of the year are promising, but this is merely the first step toward a return to social and economic normality; equally critical is the widespread availability of effective immunization, which could come by the middle of next year. We use this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly.G
Oklahoma County Independent School District No. 41, OK Oklahoma A/ Negative Local Governments We consider governance risk elevated due to our view of weakened risk management, culture, and oversight. The state board of education appointed an interim superintendent after former district management failed to alleviate concerns regarding enrollment decreases, staffing losses, and audit findings. We think additional rating pressure could stem from the interim or new administration's failure to address risk management, culture, or oversight issues that lead to financial, enrollment, or accreditation concerns. We have analyzed environmental and social risks relative to the district's economy, management, budgetary outcomes, and debt-and-liability profile and have determined these risks are in-line with the sector standard. While the district is in Tornado Alley, it has somewhat mitigated tornado risk with insurance and storm shelte
Tri-State Generation and Transmission Association Inc. Moffat County, Colorado Colorado BBB+/ Negative Cooperative Utilities We believe the utility faces significant governance risks. Over more than a decade, three CEOs have struggled to placate members that are expressing dissatisfaction with the level of rates and the utility's carbon intensity. The notices of intent to withdraw compound these risks. We believe Tri-State faces considerable environmental risks because it derived 58% of its 2019 electricity production and 54% of its 2020 electricity production from coal. However, we expect the utility will sharply reduce this level with the retirement of some of its coal fleet during this decade, which should lower but not eliminate its carbon exposure. We believe the utility faces considerable social risk because 2020 Energy Information Administration data show that its members' weighted-average retail rates are 25% above state averages. Several members exhibit much greater rate disparities. We believe this high level of rates contributes to the member discord issues. Tri-State projects reducing its wholesale member rates by about 1.5% per year over five years, which might marginally alleviate some of the financial pressures of existing retail rates.

Table 3

Published ESG Rating Actions
Rating action date Example Issuer State Team Security ESG factor Reasoning Rating action Current rating Prior rating Generic factor
3/3/2021 Y Nevada System of Higher Education NV HE Public and Private Universities S The negative outlook revision reflects our view of the significant state appropriation cuts for NSHE during the fiscal 2021-2023 biennium as well as the operational impacts facing the system due to the pandemic. Although the state funding cuts could be partially offset by federal funds from the stimulus bills, in our view, the potential larger operating deficit or the institutions' need to draw from operating reserves to balance the budget in fiscal 2021 could weaken the just-sufficient available resources of the system and pressure the rating. Outlook Revision AA- Health & Safety
3/25/2021 Y Riverton, UT UT Utilities Water and Sewer G We view the system's governance factors slightly weaker than other similarly rated utilities. The rating action reflects financial practices that were overly optimistic that led to a rate covenant violation in fiscal 2020. We anticipate the council will approve a corrective rate plan that will establish a clear trajectory for future financial performance. If future economic assumptions remain aggressive and constrain operating margins, it will likely pressure the rating. Outlook Revision AA Risk Management & internal controls
4/9/2021 Y Tri-State Generation and Transmission Association Inc. Moffat County, Colorado CO Utilities Cooperative Utility G Although the members' joint application to FERC does not constitute a notice to terminate the wholesale power contracts expiring in 2050 and early contract terminations are not imminent even if the members prevail, we nevertheless associate heightened credit exposures with the filings because we view them as an expression of dissatisfaction with Tri-State's rates, fuel mix, and/or strategies. We believe the filing is a step toward exploring alternative energy supply options that could supplant or diminish Tri-State's role as these members' power supplier. Downgrade BBB+ A- Strategy, Execution, and Monitoring
5/4/2021 Y Canadian County Independent School District No. 69 (Mustang), Oklahoma OK LG GO S The outlook revision reflects S&P Global Ratings' opinion that the district's reserve position will likely fall below its formal reserve policy of maintaining 10% of operating expenditures in reserves. The revenue shortfall for fiscal 2021 is a direct result of COVID-19 impacts, as the district experienced a decline in enrollment for the start of school year 2021 resulting reduced state funding, which we consider a social risk. Outlook Revision AA- Health & Safety
11/15/2021 Y Oklahoma County Independent School District No. 41, OK OK LG GO G The rating action reflects our view of elevated governance risk under our environmental, social, and governance (ESG) factors due to our view of weakened risk management, culture, and oversight after former district management failed to alleviate the state board of education's concerns regarding enrollment decreases, staffing losses, and audit findings that ultimately led to the state suspending the former superintendent and taking over operations. The rating action also reflects our view of weakened financial-management practices and policies under our Financial Management Assessment (FMA) methodology. Downgrade A A+ Risk Management, Culture, and Oversight
1/25/2022 Y Tri-State Generation & Transmission Association Inc. CO Utilities Cooperative Utility G We revised the outlook to negative to reflect our view that the utility faces more pronounced governance exposures following the initiation by three of Tri-State's members of the two-year notice period for withdrawing from the utility. By way of the notices, the members advised Tri-State of their intent to withdraw in January 2024. Consequently, we believe Tri-State faces uncertainties surrounding the amount of contract-termination payments it will receive following regulatory proceedings and potentially diminished economies of scale. Outlook Revision BBB+ Governance Structure

This report does not constitute a rating action.

Primary Credit Analyst:Ladunni M Okolo, Dallas + 1 (212) 438 1208;
Secondary Contacts:Geoffrey E Buswick, Boston + 1 (617) 530 8311;
Kurt E Forsgren, Boston + 1 (617) 530 8308;
Nora G Wittstruck, New York + (212) 438-8589;

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