The Rating Outlook is Stable.
The bonds are secured by net revenues of the water and sewer system (the system).
KEY RATING DRIVERS
SOLID FINANCIAL METRICS: The district exhibits a strong financial profile, characterized by good debt service coverage (DSC), five consecutive years of very robust liquidity at more than three years of cash on hand, and excess cash flows in fiscal 2012 to ensure ongoing renewal of assets. DSC and liquidity margins are expected to decline in fiscal 2013 due to wet weather but are expected to remain adequate for the rating category.
MANAGEABLE DEBT BURDEN: Debt levels are moderately low and are projected to remain so even with an additional borrowing during the next five years. Debt amortization is also very rapid with principal payout at 96% and 100% in 10 and 20 years, respectively.
AMPLE RATE FLEXIBILITY: Above-average area wealth levels provide the district with generous rate raising flexibility. Average monthly utility charges at 0.6% of median household income (MHI) are well below Fitch's affordability threshold of 2%.
ADEQUATE WATER SUPPLY: The district owns, leases and controls water rights that total approximately 30,670 acre-feet (af) per year, which management believes will be sufficient to meet projected build out demand.
STABLE SERVICE AREA: The service area is stable and relatively diverse, with a favorable economic profile characterized by high wealth levels and low unemployment.
CONTINUED POSITIVE RESULTS
The rating is sensitive to notable shifts in the district's fundamental credit characteristics, including its sound liquidity and DSC. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.
SOUND FINANCIAL METRICS
System financial performance has been solid, with total DSC consistently at or above 1.7x in each of the last five years and at a very strong 2.2x in fiscal 2012. Coverage is expected to decline to around 1.4x in fiscal 2013 due to wet weather and resulting reduced consumption. The district is planning to raise rates annually from fiscal 2014 to 2018, which will help maintain DSC margins within 'AA' category median levels.
The district also has good reserve policies in place. A portion of the district's cash balances is set aside annually to pay the following year's debt service requirement. The district's unrestricted and available restricted cash at fiscal 2012 year-end totaled
MANAGEABLE CAPITAL NEEDS AND MODERATELY LOW DEBT RATIOS
The service area is approaching build out, so future capital needs will focus primarily on system rehabilitation and repair. Management maintains a comprehensive facility plan that is reviewed annually. Approximately
The district is also moving forward with its
Debt levels currently are moderately low with debt to plant at 36% and outstanding debt per customer at
VERY AFFORDABLE RATES WITH FUTURE FLEXIBILITY
The district adjusted its water rate structure in 2003 to encourage conservation in response to drought conditions. Charges now consist of an availability charge and a usage fee. The district prudently implemented the fixed water service availability fee to prevent any revenue declines related to reduced usage; the amount is tied to the district's annual debt service requirements and fixed costs related to billing.
The fee amount, which had been
Wastewater charges consist of a base charge (which accounted for approximately 45% of the total wastewater bill in fiscal 2013) and a usage fee; a 3.8% increase to the wastewater bill is budgeted for fiscal 2014. At
SOUND ECONOMIC FUNDAMENTALS
The district was formed in 1980 in the northern portion of
ADEQUATE WATER SUPPLY
The district obtains its water from various sources, including groundwater reservoirs and aquifers (17,000 af) and surface water (13,760 af). All groundwater beneath
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's U.S. Municipal Revenue-Supported Rating Criteria, this action was additionally informed by information from Creditscope.
--'Revenue-Supported Rating Criteria' (
--'U.S. Water and Sewer Revenue Bond Rating Criteria' (
--'2014 Water and Sewer Medians' (
--'2014 Outlook: Water and Sewer Sector' (
Revenue-Supported Rating Criteria
U.S. Water and Sewer Revenue Bond Rating Criteria
2014 Water and Sewer Medians
2014 Outlook: Water and Sewer Sector
Source: Fitch Ratings
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