Bangkok--17 Apr--Standard & Poor's
Standard & Poor's Ratings Services assigned its 'A+' long-term rating, and stable outlook, to San Diego Public Facilities Financing Authority, Calif.'s series 2009A and 2009B senior sewer revenue and senior sewer revenue refunding bonds, in the amount of $875.425 million, issued for the city of San Diego. At the same time, Standard & Poor's affirmed its 'A+' long-term rating, and stable outlook, on the parity debt outstanding.
"The rating reflects what we view as good historical and projected debt service coverage and the authority's strong liquidity position supported by targeted cash reserve policies," said Standard & Poor's credit analyst Sussan Corson.
"The rating also reflects council-approved system rate increases through May 1, 2010, and a regional and municipal system that serves what we consider a broad and diverse service area economy and customer base," Ms. Corson added.
These strengths are offset in our opinion by the wastewater system's: ongoing sewage treatment regulatory challenges, related primarily to a system-wide consent decree and the potential for future secondary treatment requirements at the Metropolitan Sewerage System's Point Loma plant, which have the potential to cause significant increases in the capital improvement plan (CIP); and higher-than-average rates when compared with regional systems across the country.
The stable outlook reflects our expectation that pre-approved rate increases by the city council and cash reserve policies should help to maintain what we consider good projected debt service ratios and good system liquidity in the next several years, despite the city's implementation of a large CIP associated with regulatory requirements. The outlook also reflects our expectation that the system will receive all necessary final approvals to renew the five-year modified permit for its Point Loma plant, as it has twice before, to avoid significant near-term costs associated with secondary treatment requirements. Should the system's capital needs increase significantly or should the system fail to make sufficient rate increases to maintain adequate DSC ratios, the rating could be pressured.
A senior-lien pledge of installment payments from net revenues of the wastewater system secures the bonds. Proceeds of the series 2009A bonds will be used to fund $145 million of system improvements and refund all of the authority's $224 million series 2007 subordinate sewer revenue notes outstanding, as well as a portion of the 1997A and 1997B sewer revenue bonds. Proceeds from the series 2009B bonds will be used to refund bonds outstanding and fund a debt service reserve. After this issuance, the wastewater system will have about $1.4 billion of bonds and loans outstanding secured by the system's net revenues, including senior revenue bonds and subordinate state revolving fund loans, secured by a subordinate lien of the net system revenues.
The wastewater system consists of both a sewage collection system for the city of San Diego (Municipal Wastewater Collection System) and a regional system (Metropolitan Sewerage System) that provides a transportation, treatment, and disposal system for a population of 2.1 million in the city of San Diego and 15 other cities and districts in a 450-square-mile service area.
Related Research
"Standard & Poor's Revises Criteria For Rating Water, Sewer, And Drainage Utility Revenue Bonds," Sept. 15, 2008
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Media Contact:
Ana Sandoval, New York (1) 212-438-5095, [email protected]
Analyst Contacts:
Sussan Corson, New York (1) 212-438-2014
Misty Newland, San Francisco (1) 415-371-5073
Key Contacts:
Americas Media Relations: (1) 212-438-6667
media_ [email protected]
Americas Customer Service: (1) 212-438-7280
[email protected]