Standard & Poor's Ratings Services said it raised its long-term rating on Galveston, Texas' waterworks and sewer system revenue debt one notch to A-plus from A. The outlook is stable.
The upgrade reflects Standard & Poor's assessment of Galveston waterworks and sewer system's continued strong finances, assisted by substantial federal funding for utility infrastructure since Hurricane Ike.
In addition, the rating service raised its underlying rating (SPUR) on Gulf Coast Water Authority, Texas' series 2011E and 2002 waterworks and sewer system contract revenue bonds, issued for Galveston and supported by the city's net system revenue, one notch to A-plus from A. The outlook is stable.
Standard & Poor's also assigned its A-plus long-term rating and stable outlook to the city's $6.565 million series 2012 waterworks and sewer system revenue refunding bonds.
"We believe Galveston has taken adequate steps to improve and stabilize the utility's cash position and maintain strong debt service coverage. In addition, we understand management's ability to adjust the utility's budget and operations to the changing economic landscape will likely be a key determinant of the credit's future direction," said Standard & Poor's credit analyst Scott Sagen. "If the system does not receive federal funding at the levels expected, we believe the effect on credit quality will likely be minimal due to current debt service coverage levels. We do not expect further rating mobility over the outlook's two-year period."
The rating also reflects Standard & Poor's opinion of the system's strong debt service coverage and liquidity, and above-average debt amortization.
Standard & Poor's believes these credit strengths are somewhat offset by the system's moderately high debt; and significant infrastructure needs, which might require additional debt issuance if the system does not receive federal funds as expected.
The city's waterworks and sewer system's net revenue pledge secures the series 2012 and 2006 revenue bonds. Officials plan to use series 2012 bond proceeds to refund the city's series 2003 bonds for cost savings.
