Standard & Poor's Ratings Services said it raised by two notches, to A-minus, its underlying rating (SPUR) on the New Orleans Sewerage & Water Board, La.'s sewer system revenue bonds.
The outlook is stable. The agency also raised by one notch, to BBB-minus, the SPUR on the board's water revenue bonds. The outlook is positive.
"The upgrades are based on the continued improvement in the sewer and water systems' financial position, which we believe is sustainable given the New Orleans city council's December 2012 approval of 10% annual rate increases for eight years," said Standard & Poor's credit analyst Theodore Chapman.
The first increase was implemented on Jan. 1, 2013. The rate increases will be a key component in helping the board fund key system reinvestment needs, which are substantial. The sewer system remains under a consent decree, modified most recently in April 2013, to address both treatment permit concerns as well as sanitary sewer overflows, in addition to ongoing efforts to rehabilitate or, in some cases, rebuild the system following 2005's hurricanes Katrina and Rita.
The water system's capital improvement plan from fiscal 2013 through 2022 totals nearly $814 million, including rehabilitation of the distribution and pumping system to help reduce the large unbilled water that continues to plague the system.