Utah ranks 3rd in state credit quality

Utah ranks 3rd in state credit quality

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SALT LAKE CITY — Utah's third-place finish in a ranking of state credit quality by a top financial publication underscores the state's reputation as a "boring but solid" investment, state Treasurer Richard Ellis said.

"It reflects that we've managed our debt well," Ellis said of the Barron's ranking that put Utah behind only North Dakota and Wyoming in a recently posted article, "States' Finances Are Now on Solid Ground."

The publication determined creditworthiness by focusing on debt along with other economic and fiscal factors, including a state's pension and health care obligations, jobless rate and bond rating.

Utah, one of only nine states with a AAA bond rating from the nation's three major credit rating agencies, was described as having "strong population growth, low-debt."

Both North Dakota and Wyoming were praised for economies driven by mineral extraction. North Dakota, the publication said, has a booming economy from fracking, while Wyoming has "strong finances" as a result of mining.

Ellis said Utah has a much more diversified economy than North Dakota, Wyoming and other high-ranked states. He said as an investor, he would "be leery" of those states' ability to sustain a strong economy.

Utah, Ellis said, has a "gilt-edged" credit rating so strong that the state can issue bonds at a lower interest rate than states that don't share the coveted "triple-triple" bond rating.

That can make the state a little dull for investors, the treasurer suggested.

"There's not much of a story for us to tell. We don't have a lot of issues," Ellis said, adding that Utah offers a low yield on bonds compared with states that have to offer higher interest rates. "That guy that wants something boring and solid, he's going to buy Utah."

Val Hale, executive director of the Governor's Office of Economic Development, said the state is a "safe place" for businesses.


We appreciate the Barron's ranking acknowledging Utah's financial stability. Utah's low debt, sensible tax structure and quality workforce have helped Utah grow its economy in a safe and predictable manner, making Utah an extremely business-friendly state.

–Val Hale, executive director of the Governor's Office of Economic Development


"We appreciate the Barron's ranking acknowledging Utah's financial stability," Hale said. "Utah's low debt, sensible tax structure and quality workforce have helped Utah grow its economy in a safe and predictable manner, making Utah an extremely business-friendly state."

Ellis said the ranking is aimed more at the institutional investors who read Barron's, not their "mom and pop" counterparts, and may not mean much to the majority of Utahns.

Gov. Gary Herbert's spokesman Marty Carpenter said such rankings can be helpful in selling the state.

"Maybe to the public at large, it's just something they hear the governor say and it's a point of pride. But rankings have meaning to us," he said. "When we can receive accolades from outside groups, they back up our claims we're doing the right things."

While Barron's described Utah's debt as modest, Herbert said in the article that there's room for the state to improve its "sterling credit quality" by reducing what it owes on outstanding bonds.

"It's just a little bit high," the governor is quoted as saying. "Either way, we're one of only nine states with a AAA bond rating (from all three major rating agencies). So we're in pretty good shape. I just want to make sure we don't jeopardize that."

Carpenter said the governor is just looking out for the state's bond rating.

"The governor protects our AAA bond rating fiercely," Carpenter said. "When you hear him say (debt) is a bit high, it's a reference to what he's comfortable with as a fiscally conservative state."

Utah currently has about $2.8 billion in outstanding general obligation bonds, Ellis said, about 70 percent of the state's constitutionally established debt limit that's calculated at 1.5 percent of the value of all taxable property.

Lawmakers have self-imposed a debt limit at about 85 percent, Ellis said, that was exceeded during the recession as property values dropped and more bonding was needed.

"To have $2.8 billion of debt outstanding is not very much when you look at the 50 states," Ellis said.

But Utah is a smaller state, and the debt is above average for states with a AAA bond rating, he said. "Debt loads are moderate. They're not high."

Still, the state will need to bond for plenty of projects, including a new state prison to replace the aging facility at Point of the Mountain in Draper and a long list of costly transportation projects.

"There's no want for projects," the treasurer said, requiring lawmakers to prioritize the state's infrastructure needs over time. "We can do it all, probably, but it may take 10 years."

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Lisa Riley Roche

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