OREANDA-NEWS. S&P Global Ratings raised both its long-term rating and underlying rating (SPUR) on Philadelphia's existing water and wastewater revenue debt to 'A+' from 'A'. We also assigned our 'A+' long-term rating to the city's series 2016 water and wastewater revenue refunding bonds. In addition, we affirmed our 'AA+/A-1+' rating on the city's series 1997B bonds, which are jointly secured by the city and the letter of credit (LOC) provider TD Bank N. A. Except for when applying joint criteria, in which case the outlook is not meaningful, the outlook on the bonds is stable. Since our last review, we have observed no significant cost escalations or unanticipated projects related to the city's large capital improvement plan (CIP), stable overall economic trends, and financial performance that continues to meet or exceed historical projections.

"The higher rating on the debt outstanding reflects the system's positive financial trends," said S&P Global Ratings credit analyst Scott Garrigan.

The city will use the series 2016 bond proceeds to refund a portion of its outstanding bonds.

Securing debt service are net revenues of the water and sewer fund, which includes (net of operating expenses) rates and charges of the system, transfers from the rate stabilization fund, and interest earnings.

Philadelphia's water and wastewater systems provide service to roughly 1.6 million people in the city and suburbs. The systems predominantly serve retail residential customers, but also serve 12 surrounding townships and utility authorities on a wholesale basis.

"The stable outlook reflects our opinion that the water department should be able to continue meeting or exceeding its financial projections," added Mr. Garrigan, "as long as it keeps making consistent rate adjustments and controlling its overall costs in a fashion consistent with or better than what the projections indicate." The outlook is also supported by the large service base, which adds both geographic and socio-economic diversity to the department's rate base.

If Philadelphia's actual financial performance significantly exceeds current projections, we could raise the rating, but we view this scenario as fairly remote, at least within the two-year outlook horizon, given the city's large amount of capital and debt needs that we believe will support future financial performance more likely to be in line with what the current projections show, which is generally steady improvement in financial metrics as opposed to significant changes compared to historical trends. Conversely, if financial metrics deteriorate, or a significant amount of additional capital spending is added to the city's CIP, we could lower the rating or revise the outlook to negative.