S&P: Rancho California Water District, CA Revenue Bond Ratings Raised To 'AAA' On Improved Financial Performance
"The raised ratings reflect our view of the district's improved financial performance in fiscal year 2016 despite challenging drought conditions, our anticipation that all-in coverage will remain above 2x going forward based on the district's substantially lower projected annual debt service requirements, and the district's anticipated deleveraging later this calendar year following the acquisition of the Santa Rosa Water Reclamation Facility by the Santa Rosa Regional Resources Authority," said S&P Global Ratings credit analyst Tim Tung.
The enterprise risk profile reflects our view of the district's:
Service area participation in the broad and diverse Riverside-San Bernardino-Ontario metropolitan area economy, Very low industry risk as a monopolistic service provider of an essential public utility, Affordable service rates in the context of the service area's very strong income levels and a track record of annual rate adjustments, andGood operational management practices and policies. The financial risk profile reflects our view of the district's:
Improved all-in coverage metric for fiscal year 2016 following a period of temporary weakness; Extremely strong liquidity position, with unrestricted cash on hand of $176 million at the end of fiscal year 2016;Manageable five-year capital plan that does not require additional debt for the next four fiscal years following the issuance of the series 2016 bonds; and Strong financial management practices and policies. An extremely strong enterprise risk profile and a very strong financial risk profile map to an indicative rating in our revenue debt criteria matrix of 'aa+', and we have used a favorable one-notch adjustment to yield a final rating of 'AAA' based on the exceptionally strong financial profile, demonstrated by the district's consistent maintenance of an unrestricted liquidity position in excess of 24 months of operating expenses.
We understand that the district is issuing the series 2016 bonds to finance capital improvements and also refinance existing obligations for annual debt service savings.