Standard & Poor's Ratings Services said it lowered its rating on Orange Cove Irrigation District, Calif.'s series 2009 and series 2012 water revenue bonds one notch to A from A-plus.
The outlook is stable.
This action reflects Standard & Poor's view of the district's stressed water supply and a steady trend of debt service coverage (DSC) that is no longer commensurate with an A-plus rating. The ratings service expects this pattern to continue.
"The stable outlook reflects our view of the district's volatile and unpredictable water supply, along with budgeting practices for net revenue at 110% of debt service that have led to adequate financial performance in prior years," said Standard & Poor's credit analyst Gregory Dziubinski. "While we view the district's standby charges and large proportion of permanent crops as positive factors, given the operational and financial hurdles posed by California's persistent drought conditions, we do not expect to raise the rating within the two-year outlook period. Moreover, if management does not continue to produce consistent DSC at, what we consider, a minimal level of sufficiency, or if unrestricted cash were to significantly deteriorate, we could take further negative rating action."
The district was formed in 1937 under California's Irrigation District Law to provide water for agricultural lands within the district's boundaries. Located along the western foothills of the Sierra Nevada in Fresno and Tulare counties, the district's service area encompasses about 28,000 acres.
