KBRA assigns a long-term rating of AAA to the Harris County, TX Permanent Improvement Refunding Bonds, Series 2026A; Permanent Improvement Tax and Revenue Certificates of Obligation, Series 2026A and 2026B; and Unlimited Tax Road Refunding Bonds, Series 2026A. KBRA additionally affirms the long-term rating of AAA for the County's outstanding Limited Tax Obligations and Unlimited Tax Obligations. The rating Outlook is Stable.

Key Credit Considerations

The ratings actions reflect the following key credit considerations:

Credit Positives

• Sizable, diverse, and resilient economy, centered around the nation’s fourth largest city, supported by sustained taxable assessed value growth and broad industry diversification.
• Strong financial profile supported by structurally balanced operations, ample reserves and liquidity, and stable property tax collections.
• Robust financial management practices, including a comprehensive budgeting process, frequent intra-fiscal year monitoring, and the maintenance of prudent reserves.
• Permanent increase in the Harris County Flood Control District O&M levy provides a dedicated recurring funding source for flood mitigation and long-term resiliency.
• Favorable debt profile characterized by moderate debt levels, manageable fixed costs, and well-funded pension obligations.

Credit Challenges

• Susceptibility to significant storm activity given its location on the Texas Gulf Coast, as evidenced by Hurricane Harvey (2017) and the less severe but still significant disaster events of 2024, including Hurricane Beryl.
• State-imposed property tax limitations constrain operating revenue flexibility and may increase pressure on future budget balancing as expenditure growth outpaces recurring revenue growth.
• Rising operating costs associated with public safety compensation, healthcare, indigent defense, and inmate housing continue to pressure expenditures.

Rating Sensitivities

For Upgrade

• Not applicable for this rating level.

For Downgrade

• Significant deterioration in operating reserves and liquidity.
• A secular decline in the socioeconomic profile of the County.

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Methodology

• Public Finance: U.S. Local Government General Obligation 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: 1016079

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