Standard & Poor’s on Monday raised its underlying rating on Natchez’s water and sewer system revenue debt to A from A-minus due to the city’s consistently strong liquidity and debt service coverage.
The upgrade affects $6.9 million of outstanding debt. The outlook is stable based on limited capital needs.
The new rating reflects the city’s stable and diversifying economic base, strong financial position with 567 days’ cash on hand, sound maximum annual debt service coverage of 1.57 times based on 2007 unaudited revenues, and mature water and sewer system with ample treatment capacity and no additional debt plans.
Below-average income levels and high unemployment partly mitigate the system’s strengths, said a report by analyst Jennifer Garza.
“We believe Natchez officials will maintain the stable debt service coverage,” Garza said. “We also believe the city’s finances will remain stable due to the recent economic development and rate increase.”
Management has addressed capital needs with a five-year capital improvement plan and intends to fund all projects with cash margins, Garza said.
Debt service coverage of revenue bonds was an adequate 1.61 times in 2007, with maximum annual debt service coverage of 1.57 times projected in 2019. Liquidity was significant with 567 days’ cash on hand at the end of fiscal 2007.