LOS ANGELES — The San Diego County Water Authority's senior lien credit rating was upgraded to AAA by S&P Global Ratings.
Water authority officials say Wednesday's one-notch upgrade marks the first time it has achieved a triple-A rating.
The authority, in a news release, called the upgrade "a boon for ratepayers who will benefit from lower financing costs."
S&P credited the upgrade to strong financial management, robust drought planning, increased storage capacity due to the San Vicente Dam Raise, and reserves for managing contingencies, among other factors.
"The upgrade reflects the authority's successful integration of its increased storage capacity and desalinated water supply into its system while weathering one of the driest periods on record in the state without significant impact to its rates or debt burden," S&P credit analyst Chloe Weil said in a statement.
S&P also ugpraded the authority's subordinate bonds to AA-plus from AA, and affirmed its A-1-plus short-term ratings on its outstanding commercial paper.
The actions came ahead of plans to sell $340 million of 2016A and 2016B senior bonds and an $86 million subordinate 2016S-1 short-term refunding note.
Proceeds from the series 2016S-1 bonds will refund some commercial paper notes, according to S&P.
Since 2005, the water authority said it has saved $78 million through five bond refundings, and the upcoming refunding is expected to save approximately $50 million.
"Our history of prudent financial stewardship benefits the entire region in many ways," Mark Weston, Board chair for the water authority, said in a statement. "The AAA rating is a validation of our efforts – not only to build and maintain a world class water supply, but to build and maintain a strong financial position through strategic planning, rigorous forecasting and unfailing execution of our goals."
Moody's Investors Service affirmed its Aa2 rating for the senior lien debt. Moody's cited vigilance in handling charges and restrictions imposed by the authority's largest supplier, the Metropolitan Water District of Southern California.
"Most recently, the Authority was awarded $188.3 million in damages plus interest by a San Francisco Superior Court judge for [MWD] water rates charged from 2011-2014 that violate the cost of service requirements under the state's constitution," said Moody's credit opinion Tuesday. "Importantly, the court ruled that MWD had been undercalculating the Authority's preferential rights to MWD water, significantly increasing the Authority's statutory water rights by tens of thousands of acre-feet per year. While the decision is under appeal, it provides a strong example of the Authority's intent focus on supplies and charges."
Fitch Ratings affirmed its AA-plus senior lien rating saying the agency "adheres to prudent financial management practices and engages in comprehensive long-term planning aimed at securing a diverse and reliable future water supply."
Fitch also said that its ratings were supported by Water Authority investments that have improved the region's water supply reliability and drought resiliency.
"When investors hear our story, they are impressed by 25 years of focused and successful efforts to vastly improve water supply reliability, actively manage our debt portfolio, provide predictable rates and invest in strategic capital improvements," said Lisa Marie Harris, finance director for the Water Authority. "We have strong debt coverage, healthy reserves and committed management – a recipe for continued success for years to come."
Created in 1944, the authority delivers wholesale water supplies to 24 retail water providers, including cities, special districts and a military base.
