The Rating Outlook is Stable.
Outstanding senior lien bonds are secured by a first lien on net revenues of the county's combined water and sewer system (the system), while outstanding subordinate lien bonds are backed by a junior lien on net revenues.
KEY RATING DRIVERS
SOLID FINANCIAL PERFORMANCE: Both senior and all-in debt service coverage (DSC) and liquidity levels remained strong in fiscal 2013. The county's conservative financial projections indicate that operations will post comparably favorable results over the next five years.
MANAGEABLE CAPITAL NEEDS: The system's capital improvement plan (CIP) remains moderate despite the addition of projects to upgrade the county's largest water reclamation facility (WRF).
FAVORABLE DEBT PROFILE: Leverage ratios are very low and are projected to remain low for the foreseeable future despite the expected issuance of additional subordinate lien debt to fund the WRF upgrades. However, the majority of the five-year CIP will be funded by existing restricted reserves and recurring revenues.
AUTOMATIC RATE ADJUSTMENT: Fitch views positively the county's policy requiring a periodic adjustment of rates to ensure full cost recovery of purchased water and wastewater treatment expenses.
LARGE AND DIVERSE ECONOMY: The county's utility system serves a large, economically diverse service area in northeast
MAINTENANCE OF STRONG CREDIT PROFILE: The rating is sensitive to shifts in fundamental credit characteristics including the county system's strong financial, debt, and operational management. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.
SOUND FINANCIAL PROFILE
The county's financial metrics remained strong in fiscal 2013. Net revenues available for debt service yielded solid DSC of both senior and subordinate lien debt, ending the year with 2.1x and 2.0x coverage when excluding connection charges, respectively. Debt carrying costs are very reasonable, as total annual debt service comprised a modest 12% of gross revenues, well below 'AAA' median averages. Liquidity is also very strong, with unrestricted cash and investments totaling
The county restricts an additional
LARGE CUSTOMER BASE, AFFORDABLE RATES
The widely dispersed system provides potable water service for about 25,000 directly-billed retail customers and approximately 100,000 wholesale customer equivalents throughout
The majority of sewer services are provided by a number of long-term, exclusive-use wholesale contracts in incorporated areas of the county, and the remainder of services are provided on a retail basis to unincorporated communities. The system's revenue base is bolstered by the county's strict bulk contract terms and a county ordinance that mandates sewer connections of all occupied residences where sewers are available.
The system's direct combined water and sewer retail customer charges represent approximately 1.4% of median household income (MHI), less than the 2% benchmark that Fitch considers affordable. The county obtains roughly 80% of its water from
MANAGEABLE CAPITAL PLAN
The system's five-year CIP through fiscal 2018 totals
LOW DEBT LEVELS
Fitch projects that currently strong debt metrics will remain well below the 'AAA' category medians even with the addition of the combined IEPA subordinate loans. Leverage ratios for the system in fiscal 2013 were very low, with outstanding debt per capita at just
SOUND MANAGEMENT PRACTICES
Management practices are sound--marked by frequently updated and comprehensive long-term financial and capital planning, as well as a commitment to maintaining strong liquidity levels. Unrestricted cash reserves continue to grow as the system's DEI fund is replenished annually, well in excess of covenanted minimum quarterly
SYSTEM AND SERVICE AREA
The county is located in the northeast corner of Illinois and is home to about 70 companies, the largest of which include Abbott Laboratories, Baxter International Inc.,
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' (
--'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
Eva Rippeteau, +1 212-908-9105
Adrienne Booker, +1 312-368-5471
Steve Murray, +1 512-215-3729
Source: Fitch Ratings
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