Standard & Poor's Ratings Services said it lowered its long-term rating to A-plus from AA-minus on Montecito Water District, Calif.'s series 2010A refunding revenue certificates of participation.
The outlook is stable.
"The lowered rating reflects our view of the district's uneven, and at times insufficient, financial performance in conjunction with rates that have remained unchanged despite the presence of a 1.25x rate covenant," said Standard & Poor's credit analyst Tim Tung.
The rating reflects the district's: history of uneven financial performance, including insufficient debt service coverage in fiscal years 2006 and 2011, and high service rates that have remained unchanged since August 2008 despite a covenant to set rates and charges at levels sufficient to produce net revenues at least equal to 1.25x annual debt service.
Partially offsetting the preceding credit weaknesses are the district's: built-out community with very strong income levels, limited capital needs with capital plans focused on renewal and replacement projects, and historically strong liquidity levels.