Fitch Raises Florida's Tohopekaliga Water Authority

Fitch Ratings on Monday upgraded Florida’s Tohopekaliga Water Authority to AA-plus from AA.

The action affects about $93 million of utility system revenue bonds. The outlook is stable.

“The rating upgrade reflects continued strong financial performance and flexibility, which is supported by consistently solid financial margins and historical debt-service coverage, an above-average liquidity position, and affordable rates,” said Fitch analyst Andrew DeStefano.

The higher rating also incorporates the authority’s modest, cash-funded capital needs, which will allow an already manageable debt burden to improve over time, DeStefano said.

Tohopekaliga is an independent special district created in 2003 to provide regional development, planning and delivery of potable water, wastewater and reclaimed water services in Osceola County, which is south of Orlando.

The district’s service area is 1,500 square miles and the customer base is mostly residential with 86,000 retail water customers and 80,000 retail sewer customers. The authority’s bonds are secured by a senior lien pledge of water and sewer net revenues along with expansion-related system development charges.

Treatment capacity remains strong on a combined basis, plant operating permits are current, and the system is not facing any regulatory issues, according to DeStefano.

“The system’s debt burden is low compared to similarly rated systems, and the overall profile has improved somewhat with the refunding of the Series 2007 variable-rate bonds in 2011,” he said. The system has no variable-rate debt or swaps outstanding.

The authority has a $108 million five-year capital improvement plan focusing mainly on system maintenance and upgrades, all of which is expected to be funded with cash. No new debt is projected over the intermediate term, DeStefano said. The authority’s financial profile remains sound.

In fiscal 2010, the system generated over $30 million in net available revenues that provided strong debt-service coverage of 2.6 times. Financial results in fiscal 2011 were similar to fiscal 2010 with an increase in operating revenues. Debt service coverage is projected to remain above 2 times.

Liquidity is strong with more than 550 days of cash on hand for operations.

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