Standard & Poor's Ratings Services said it has lowered its ratings on Hampton Roads Sanitation District (HRSD), Va.'s senior wastewater revenue bonds outstanding to AA-plus from AAA; and its rating on the district's subordinate wastewater revenue bonds outstanding to AA from AA-plus.
At the same time, Standard & Poor's assigned its AA-plus long-term rating to the HRSD's wastewater revenue bonds, refunding series 2014A. The outlook is stable. Standard & Poor's also lowered the long-term rating on the HRSD's $25 million series 2011 subordinate variable rate wastewater revenue bonds to AA from AA-plus; the rating's A-1-plus short-term component is unchanged.
The downgrade reflects the district's agreeing to implement a regional wet weather management plan (RWWMP) that addresses the region's federally mandated consent decrees. "In our opinion, this will expose the HRSD to added risk from issuing a significant amount of debt, likely after 2019," said Standard & Poor's credit analyst Joseph Pezzimenti.
The downgrade also reflects the district's long-range forecast (2015-2034), which includes the first 16 years (2019-2034) of funding the 20 year RWWMP, along with the HRSD's capital improvement program.
Despite this, the agency expects the district to maintain strong financial performance with good-to-strong total coverage ratios and strong liquidity in the near term.
