Corpus Christi to sell bonds as water woes weigh on ratings

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The Corpus Christi City Council on Tuesday gave final approval to the issuance of up to $728 million of bonds in the wake of rating downgrades and negative outlooks spurred by depleted water supplies.

The drought-stricken Texas city's upcoming debt consists of no more than $500 million of utility system senior lien revenue bonds for water and wastewater projects, $113.17 million of  refunding bonds, as well as $115 million of general obligation bonds tapping voter-approved authorization from 2022 and 2024.

"The city is collaborating with its financial advisor to determine the optimal timing for entering the market to price the bonds," a statement on Tuesday from Corpus Christi's Finance Department said. "Additionally, we are assessing various underwriters for the upcoming transactions."

A timeline presented to the city council last week showed the bonds pricing in August.

A Level 1 emergency — indicating the city's water system is 180 days from supply not meeting demand — has been projected for September.

Previous projections had the onset of a water supply emergency as soon as May, in November, or never. Corpus Christi Water, a city agency, is the primary water supplier for a seven-county region, which is experiencing stage three drought conditions that triggered water-use restrictions. 

While the city has been scrambling to boost water supplies, the looming crisis is weighing on its credit ratings. 

Last week, S&P Global Ratings downgraded the city's utility system revenue debt rating two notches to A and placed it on CreditWatch indicating the potential for another downgrade over the next six months "if Corpus Christi's acute drought conditions worsen and result in a prolonged Level 1 emergency that pressures its operations, financial performance, rate-raising practices, and economic activity."

Moody's Ratings, which downgraded Corpus Christi's GO rating to A1 from Aa2 and utility system rating to A1 from Aa3 in December, launched a review last month for another round of potential downgrades.  

Fitch Rating has assigned negative outlooks to the city's AA issuer and AA-minus utility system ratings.

City officials have said $1 billion of projects aimed at producing 76 million gallons of water daily are underway. Long-term projects being explored involve seawater desalination.