Moody’s Investors Service has revised its outlook to negative on St. Paul, Minn.’s sewer revenue bond Aa1 credit over a weakening of its financial metrics.

The review came ahead of the city’s $12.2 million sewer new-money and refunding issue. The action impacts $63 million of debt. The bonds are secured by gross revenues of the system.

Proceeds will finance various systemwide capital improvements and refund debt for savings.

The rating reflects the system’s sizeable service area, flat customer growth, historically sound financial operations with recent declines in coverage levels that still remain healthy, reduced yet still solid liquidity, and a low debt ratio with future borrowing needs.

“The negative outlook reflects the expectation the system’s liquidity and coverage levels may decline to levels that are no longer commensurate with the Aa1 rating category,” Moody’s wrote.

The credit benefits from the city’s unlimited ability to change rates and a service area that includes the state capital. In addition to weaker financial metrics, the system is challenged by stagnant customer growth and usage trends and the closure of a Ford plant, its fifth largest customer.

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