S&P: Philadelphia Water, Wastewater Revenue Debt Rating Raised To 'A+' From 'A' On Positive Financial Trends
"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.
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