Proceeds of the series 2014A&B bonds will refund variable rate bonds, pay swap termination fees, and pay costs of issuance. Bonds are expected to price on
Fitch also affirms the following outstanding
The Rating Outlook is Stable.
Bonds are payable from net revenues of the wastewater system. Tax receipts are not pledged to bondholders.
KEY RATING DRIVERS
STRONG SERVICE AREA:
HEALTHY FINANCIAL MARGINS: Margins are healthy with Fitch-calculated debt service coverage of revenue bonds of 1.85x in fiscal 2013. Liquidity is strong. Management's financial forecast projects continued compliance with the district's 1.6x target threshold and forecast assumptions appear reasonable.
REVENUE DIVERSITY; RATE FLEXIBILITY: Revenue diversity and a high degree of fixed charges (45% of revenues) provide revenue stability. Rate flexibility is demonstrated by the Board's recent approved rate increases and combined wastewater bills that are competitive in the region.
TREATMENT CAPACITY EXCESS: Excess treatment capacity is managed by sales to regional waste suppliers through the resource recovery program. Additional revenue provided by this program provides some rate relief to customers and offsets the costs associated with excess capacity.
REGULATORY COMPLIANCE REQUIRED: Despite the excess capacity during dry weather, the treatment plant is undersized to treat infrequent, unusually large wet weather flows. Negotiations on a consent decree are ongoing.
LONG-TERM MARKET ACCESS: The 'F1+' rating assigned to the extendible commercial paper notes and series 2011 index bonds corresponds to the long-term rating on
STABLE OUTLOOK: The rating is sensitive to shifts in fundamental credit characteristics including
The district provides wholesale wastewater treatment service to approximately 650,000 people within an area of the district designated as Special District No. 1. Special District No. 1 is a separate district within
Seven wholesale customers provide collected wastewater to the district for treatment and disposal. Customers include the cities of
EXCESS TREATMENT CAPACITY DURING DRY WEATHER
In order to maximize the value of the plant's excess capacity, the district operates its resource recovery program. The program accepts liquid and solid waste streams delivered by truck from both inside and outside the service area for treatment. The program, which began in 2001, provides substantial additional revenues to the district of around
REGULATORY REQUIREMENTS RELATED TO WET WEATHER
Despite the excess capacity during dry weather, treatment capacity is not sufficient to meet flow during peak storm events because of the inflow and infiltration (I&I) of rainwater and storm run-off into collection pipes.
The district's wet weather treatment and discharge facilities provide primary treatment of wet weather overflows for direct discharge into the
MODEST CAPITAL NEEDS DESPITE EXPECTED CONSENT DECREE
The district's five-year capital improvement plan is moderate at
The district's debt burden is above average for the rating category but will lessen with the lack of debt issuance over the next five years. Debt per capita is
HEALTHY FINANCIAL PERFORMANCE
Fitch calculated debt service coverage in fiscal 2013 was 1.85x and all-in debt service coverage was 1.65x, including payment of commercial paper and GO bonds. Tax revenues are included in Fitch's coverage calculation although they are not pledged to revenue bondholders. Fitch's all-in debt service includes payment of the G.O. bonds.
Fiscal 2014 year to date performance is generally in line with fiscal 2013 financial performance and slightly ahead of budget due to strong resource recovery revenues. Debt service coverage levels are projected to remain at or above this level in management's five year forecast. Debt service payments are flat over the next five years.
Liquidity has improved in recent years to
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.
--'U.S. Water and Sewer Revenue Bond Rating Criteria' (
--'Rating U.S. Public Finance Short-Term Debt' (
U.S. Water and Sewer Revenue Bond Rating Criteria
Rating U.S. Public Finance Short-Term Debt
Source: Fitch Ratings
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