LOS ANGELES — Moody's Investors Service downgraded Central Basin Municipal Water District, Calif.’s refunding revenue bonds one notch to A1 from Aa3 citing declining operating revenues due to conservation efforts from the prolonged drought.
The water district holds a AA-plus rating from Fitch Ratings and is rated A with a negative outlook by Standard & Poor’s.
Central Basin, a member of the Metropolitan Water District, supplies water to 2 million people in southeastern Los Angeles County.
The downgrade was driven by an expectation that declining operating revenues will result in lower debt service coverage, Moody’s said in an Oct. 15 report.
The change affects Series 2010A refunding certificates of participation, and Series 2008B adjustable rate refunding COPs totaling $48.4 million. The COPs are secured by a senior lien on net revenues of the district, on parity with the district's swap payments. .
The district had $50.6 million in long-term debt outstanding as of year-end 2014, according to its most recent comprehensive annual financial report.
The rating agency anticipates stable debt coverage at lower levels through fiscal 2017, because of resolved litigation and contracted water sales. It also anticipates stable liquidity and unrestricted reserve levels in the near term.