Standard & Poor's Ratings Services said it has raised its rating on the city of Arlington, Wash.'s water and sewer revenue bonds outstanding to AA from AA-minus.
The outlook is stable.
"The upgrade reflects our view of consistently strong senior-lien and total debt service coverage, coupled with a strong liquidity position and no additional debt plans," said Standard & Poor's credit analyst Adam Torres.
More specifically, the rating reflects the following credit strengths: solid historical financial performance, with senior-lien debt service coverage in the past three years no lower than 5.37x, excluding one-time tap-in fees; consistent and planned rate increases for both water and sewer service; strong income levels coupled with access to the Everett and Seattle employment bases; and a primarily residential customer base that has sufficient water supply and sewer capacity.
Arlington is in northern Snohomish County, approximately 10 miles north of Everett and 40 miles north of Seattle. Residents have access to local employment as well as commuter employment in the larger city of Everett. Arlington covers approximately 8.2 square miles and is primarily suburban and rural residential. The water system has adequate supply to meet peak demands of 2.4 million gallons per day (mgd), while available supply is 4.7 mgd. The wastewater system has a permitted available capacity of 2.6 mgd on average, but can handle up to 11.0 mgd during a peak event.
The stable outlook reflects the expectation that continued rate increases will maintain strong debt service coverage and liquidity. Adding to the rating's stability is the customer base's residential nature and access to Everett's employment base. S&P does not expect to raise the rating during our two-year outlook period; however, significant financial deterioration could lead to a downgrade.
