DALLAS — Colorado Springs Utilities System was on review for a possible downgrade of its Moody’s Investors Service rating of Aa2 Tuesday as the city prepared to issue $106 million of revenue refunding bonds.

“The review for downgrade will take into consideration whether the utilities can return to financial metrics appropriate for a Aa2-rated utility,” Moody’s analyst Dan Aschenbach wrote in a Tuesday report. “Rating pressures related to the utilities’ significant capital improvement program and its aggressive debt management amidst a slowly recovering economy are factors in the evaluation.”

Standard & Poor’s and Fitch Ratings maintained a stable outlook on their AA ratings.

The refunding bonds are expected to be sold before the end of the month, with the total amount subject to change, depending on market conditions.

“The rating continues to recognize the increased pressure on the customer base from the implementation of significant rate increases to fund the utility’s $1.15 billion infrastructure improvement program through 2016,” Aschenbach noted. “The higher electric and water bills come at a time when the Colorado Springs metropolitan area economy is slowly recovering from the recent downturn.”

Moody’s placed the rating under review for downgrade after the utility’s adjusted debt service coverage ratio fell in each of the past three years to a level that is under two-times coverage.

“Maintaining financial metrics appropriate to the Aa level — including more than two times adjusted debt service coverage on a sustained basis — will be critical as the utilities moves ahead with its capital improvement program,” Aschenbach wrote.

The utilities’ overall business risk profile is a three on Standard & Poor’s scale of one to 10, with one being the strongest.

The utilities provide electricity, gas, water, and wastewater services to customers in Colorado Springs.

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