Standard & Poor's Ratings Services said it raised its underlying rating one notch, to AA from AA-minus, on Conroe, Texas' outstanding water and sewer revenue debt.
At the same time, Standard & Poor's assigned its AA SPUR to the city's series 2013 water and sewer system revenue bonds. The outlook on all ratings is stable. The upgrade affects approximately $69.6 million of outstanding parity revenue bonds.
"We base our upgrade on the city's sustained strong financial risk profile," said Standard & Poor's credit analyst Theodore Chapman. "We consider the financial risk profile sustainable despite the region expecting very strong growth in the near term."
Additional factors that also support the rating include the system's: economically sound service area with access to economic opportunities within the Houston metropolitan statistical area; strong operational profile despite a regulatory mandate that will affect the raw-water supply by 2015; and strong, well-embedded financial management policies across the city's major operating funds.
The city's expectation of a large, debt-funded project within the next five years tempers any potential for a further upgrade in the near term.
A first-lien pledge on the net revenues from the city's retail water and sewer system operations secures the bonds.
The city serves just over 16,100 metered customers in a service area 35 miles north of Houston on Interstate 45. It is Montgomery County's seat and commercial center.
