Rating Action: Moody's affirms Grant County, NM's GO & GRT ratings at A2; outlook remains negativeGlobal Credit Research - 06 Sep 2022New York, September 06, 2022 -- Moody's Investors Service has affirmed the A2 ratings on Grant County, NM's outstanding general obligation unlimited tax (GOULT) and gross receipts tax (GRT) bonds. The action affects $6.5 million in GO and $5.3 million GRT debt. The outlook remains negative.RATINGS RATIONALEThe A2 rating on the county's GOULT bonds reflects the county's moderately-sized tax base, a limited local economy that is concentrated in copper mining, and below average resident incomes. The rating also incorporates the county's healthy financial position that benefits from conservative budgeting, as well as manageable debt and pension burdens. The rating incorporates enterprise risk associated with Gila Regional Medical Center, a component unit of the county, which has a recent history of challenged financial operations. The medical center's financial position has improved materially since the implementation of new management, though it still poses material credit risk since the hospital's budget is roughly three times the size of the county.The A2 rating on the county's GRT bonds reflects strong debt service coverage, adequate legal provisions and lack of future borrowing plans. The rating also incorporates the strength of the county's general credit quality.RATING OUTLOOKThe negative outlook reflects the continued uncertainty surrounding the enterprise risk posed by Gila Regional Medical Center (GRMC), especially considering that labor shortages and inflation are expected to constrain financial performance throughout the healthcare sector. The outlook further reflects the risk that GRMC's recently improved financial operations have been bolstered by one-time federal and state coronavirus relief funding, and that GRMC may not maintain sound financial performance as these one-time revenues cease. If GRMC is unable to maintain positive operating margins absent one-time revenue sources and/or the county uses its own resources to support the hospital, downward rating action is likely.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Reduction in the enterprise risk posed by the hospital, evidenced by continued profitable hospital operations absent one-time revenue sources- Material tax base expansion and diversification- Significant increase in reserves- Improvement in the county's general credit profile [GRT]FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Inability of the hospital to maintain profitable operations absent one-time revenues- Continued tax base contraction- Deterioration of reserves; use of reserves to support hospital operations- Significant increase in debt burden- Decline in debt service coverage levels on the outstanding GRT bonds due to declining pledged revenues and/or further leveraging [GRT]- Downgrade of the county's GO rating [GRT]LEGAL SECURITYThe GOULT bonds are payable by a direct and continuing property tax levied, without limitation as to rate of amount, on all taxable property within the county. The GRT bonds constitute special limited obligations of the county, payable by an irrevocable and first lien upon the revenues of the 0.375% hold-harmless gross receipts tax.PROFILEGrant County is located in southwestern New Mexico (Aa2 stable). Albuquerque (Aa3 positive) lies approximately 200 miles to the north, and El Paso, Texas, lies approximately 150 miles to the southeast. The local economy is based on copper mining. The population is estimated at 27,000.METHODOLOGYThe principal methodology used in the general obligation ratings was US Local Government General Obligation Debt published in January 2021 and available at https://ratings.moodys.com/api/rmc-documents/70015. The principal methodology used in the special tax rating was US Public Finance Special Tax Methodology published in January 2021 and available at https://ratings.moodys.com/api/rmc-documents/70024. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of these methodologies.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating. Jeffrey Norred Lead Analyst REGIONAL_SOUTHWEST Moody's Investors Service, Inc. 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