Ann Arbor, Mich., Waters Raised to AA by S&P

Standard & Poor's Ratings Services said it raised its long-term rating on Ann Arbor, Mich.'s outstanding water enterprise revenue bonds to AA from AA-minus.

The outlook is stable.

"The higher ratings reflect our view of management's ability to produce consistently good to strong debt service coverage without diluting the strong unrestricted cash and investments," said Standard & Poor's credit analyst Scott Garrigan.

The ratings reflect: the system's strong and diverse economic base, anchored by the University of Michigan, that lends stability to the system's revenue base; management's ability to maintain good to strong debt service coverage and strong liquidity; competitive rates, providing flexibility to increase rates, coupled with the willingness to increase those rates; and ample treatment capacity with limited additional debt needs.

The net revenues of the water system secure debt service on the bonds.

Ann Arbor's water system serves about 28,000 customers primarily in the city of Ann Arbor as well as portions of three surrounding townships under wholesale contacts.

"The stable outlook reflects our expectation that the city's financial performance will remain strong," added Garrigan, "and that it will continue to ensure adequate supply for its customers, while maintaining a reasonable capital improvement plan with modest expected future debt issuances."

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