NEW YORK - Moody's Investors Service said today it has downgraded Merced County Regional Waste Management Authority, Calif.'s solid waste revenue bonds to Baa3 from A3.
The downgrade reflects noticeable deterioration in waste deliveries to the system since 2007 resulting in the authority's heavy reliance on the rate stabilization fund to meet their net revenue coverage covenant.
Unless a significant turnaround in waste deliveries occurs or additional tip fee increases are approved above and beyond the recently approved 5.2% fee increase, the rate stabilization fund is likely be depleted by 2011.
The downgrade also reflects the projects inability to meet sum sufficient debt service coverage from net revenues, which is inconsistent for projects in the A-rated category.
The negative outlook reflects continued declines in waste tonnage before flattening out in 2011 and a weaker economic service area compared to other similarly rated projects with comparable contractual structures.
