Moody’s Investors Service last week downgraded the Camrosa Water District’s water and sewer system revenue bonds to Baa1 from A2 after the district failed to raise rates to keep up with rising water costs.
“The downgrade primarily reflects the district’s weakened financial position and likely continued below-average debt service coverage levels,” analyst Bridget Young said in a report.
Between fiscal 2004 and fiscal 2005, the district’s debt service coverage ratio fell from 1.59 times annual debt service to 1.1 times, which was below the covenanted 1.15 times ratio. Moody’s attributed the decline to the district’s failure to adjust rates to keep up with costs and its continued spending for capital projects.
Moody’s said the district has installed new management and plans to improve its debt service coverage ratios.
“The district, under new management, increased rates in fiscal 2007 and 2008, improving debt service coverage,” Young said. It also “began to develop a water master plan designed to reduce the district’s dependence on imported water.”
The rate increase improved the district’s debt service coverage ratio to 1.44 times annual debt service in fiscal 2008. It again raised rates in fiscal 2009, which management expects to push the coverage ratio to a “solid” 1.6 to 1.8 times debt service.
The Camrosa Water District is located in Ventura County in southern California and includes the city of Camarillo.