Standard & Poor's on Tuesday raised its underlying rating to A-plus from A on Athens' water and sewer revenue warrants based on the city maintaining strong finances despite significant capital requirements.
The rating action affects $17.6 million of outstanding debt. The outlook remains stable.
"We think the demonstrated willingness of Athens officials to adjust rates, given the water and sewer system's currently identified capital program, will adequately address all of Athens' growth- and regulatory-driven requirements," said analyst Ted Chapman. "This will allow management to maintain the system's solid financial position."
Additional factors include a sound service-area economy boosted by participation in the Huntsville metropolitan area. Athens' average wealth and income indicators and a relatively elongated debt maturity schedule preclude a higher rating, Chapman said.
Audited fiscal 2006 figures showed net revenues available for debt service generated more than 2.7 times maximum annual debt service. The water-sewer system's $1.1 million of unrestricted cash in fiscal 2006 was equivalent to three months' operating expenses.
"Despite some large customers, including Limestone County Water Authority, system revenues are not dependent on any of the principal water customers," Chapman said. "With an average growth rate of about 2.5% annually, customer base diversification continues. Most growth to the customer base of 9,866 is residential and occurring in eastern Athens, which is closest to Huntsville."
Moody's Investors Service rates the bonds A3.
