Standard & Poor’s last Friday upgraded warrants issued by Decatur for the Decatur Municipal Utilities Board to A-plus from A.
The rating change affected $19.7 million of outstanding water revenue debt principal, said analyst Scott Sagen. The outlook is stable.
“The upgrade is based on the water system’s improved financial performance as evidenced by a good debt service coverage ratio and strong liquidity position,” Sagen said in a release.
The higher rating reflects the system’s large, primarily residential customer base with comparatively low water rates, sufficient capacity to meet increases in demand, low debt burden, and ability to fund future capital improvements with cash. The water system serves 24,990 customers, of which 88% are residential.
Sagen said the credit strengths are partly offset by revenue concentration, with the 10 leading customers accounting for 33% of water revenues.
Decatur, whose general obligation debt is rated AA-minus by Standard & Poor’s, is located in northern Alabama about 20 miles from Huntsville.
