S&P: Saginaw, MI Water Supply System Revenue Debt Rating Outlook Revised To Negative On Weakening Finances
The rating service also assigned its 'A' long-term rating and negative outlook to the city's $23.42 million series 2016 water supply system revenue bonds and affirmed its 'A' SPUR on the city's existing water supply system revenue debt.
The outlook revision reflects S&P Global Ratings' opinion of the water system's declining all-in debt service coverage and liquidity, coupled with a contingent liability risk stemming from high pension and other postemployment benefits.
The rating reflects S&P Global Ratings' opinion of the combination of strong enterprise and financial risk profiles.
"We could lower the rating over the outlook period if planned rate increases and changes to pension and health care plans fail to stabilize the system's finances," said S&P Global Ratings credit analyst Gregory Dziubinski. "However, we could revise the outlook to stable if system finances were to improve."
The negative outlook reflects S&P Global Ratings' opinion of the recent decline in the water system's finances, measured by all-in debt service coverage and liquidity. An additional concern is that with the system's currently high liquidity, it could support the general fund due to the fund's currently low reserves.
The city is issuing the series 2016 bonds to advance refund a portion of its series 2008 callable water supply system revenue bonds and pay the costs of acquiring and constructing the replacement of raw water transmission mains.
Net water system revenue secures the bonds.