The Rating Outlook is Stable.
The bonds are secured by a gross revenue pledge of authority assets, funds and revenues set by
KEY RATING DRIVERS
ROBUST DEBT SERVICE COVERAGE: The authority's gross lien on sewer assessments levied by the county continues to provide for exceptionally strong coverage of the authority's debt service and ample coverage of all required obligations under the agreement between the county and the authority. Fitch expects the authority's strong coverage levels to continue given the lack of future debt plans.
STABLE SERVICE AREA: Pledged assessments are derived from a large and diverse tax base with good economic and wealth indicators.
MIXED SECURITY FEATURES: The authority's bonds are secured by a gross lien on sewer and storm water assessments collected on property tax bills. However, legal covenants permit assessments to be set at only 80% of total projected debt service and operating expenses. Healthy reserve levels partially mitigate this risk.
ESCALATION IN DEBT LEVELS: Although not anticipated, additional debt that significantly reduces debt service coverage and/or a reduction in existing reserves that provide a needed cushion to offset the weak legal covenants would be viewed negatively.
Pursuant to the agreement, the authority acquired all of the district's sewer and storm water facilities, buildings, equipment and related assets (other than land) and is obligated to pay for the system assets in installments by undertaking to pay debt service on outstanding GO bonds issued by or on behalf of the county.
The authority's revenues are derived from sewer and storm water assessments, which are collected on the property tax bill. The agreement requires the county to direct each underlying city and town receiver of taxes and assessments to pay all assessments directly to the authority's trustee. The authority retains sufficient funds to service all debt (including county sewer and storm water bonds) and pay its operating expenses each year. Excess funds are remitted to the district to fund its operations.
Coverage of the authority's annual debt service and the county's sewer and storm water debt obligations has remained at a high level each year since the authority's creation. Debt service coverage on the authority's obligations has remained above 7.0x, while coverage of total debt service continues to exceed 2.0x.
The district provides sewer and storm water collection and treatment to most county residents. County income indicators measured on a per capita and median household basis continue to exceed state and national figures by a wide margin, as does the county's most recent unemployment rate of 5.2%.
The county's strong socioeconomic profile continues to drive generally strong collection rates of sewer and storm water assessments, and any deficiency in tax collections would be remitted in full to the authority by the county. Pursuant to the agreement, the county is required to establish and maintain an operating and maintenance reserve fund in an amount not to exceed 25% of operating expenses of the district.
The O&M reserve fund would be available to the authority (after request from the trustee) if necessary to pay debt service on authority bonds in the event revenues are insufficient. Fitch believes the generally high collection rates of annual assessments, strong debt service coverage on authority debt service provided by the gross lien, and the availability of robust reserves to cover any shortfall in revenue provides sufficient protection for bondholders.
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's 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', dated
--'2014 Outlook: Water and Sewer Sector', dated
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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