NEW YORK - Moody's Investors Service said it has downgraded to Aa2 from Aa1 the rating on Grand Rapids' (MI) $130.8 million in water revenue debt. The outlook has been revised to stable from negative.
The bonds are secured by a first lien on water system net revenues. The downgrade to the Aa2 rating reflects a multi-year drop in the system's debt service coverage ratios from historic levels; challenges facing the service area, including a declining labor force and below average socioeconomic indices; and declining usage of the system.
The rating additionally incorporates the system's strong management with unlimited rate-setting authority; long-term contracts with both retail and wholesale communities; and solid cash reserve levels. The stable outlook reflects our expectation that, while debt service coverage ratios have declined, they will remain stable due to the city's extensive annual rate setting process and willingness to raise rates to remain above the rate covenant.
