S&P Global Ratings lowered its outlook on DeKalb County, Georgia, water and sewer senior lien bonds to negative from stable, citing the possibility that debt-service coverage will continue to weaken. It affirmed the AA-minus rating on the debt.
The rating action affects $1.28 billion.
The bonds are secured by net revenues of the county's
"The rating reflects the county's declining all-in debt service coverage metrics, which are expected to remain between 1.2X-1.4X for the next three fiscal years," S&P said. By comparison the median rating for AA-minus rated utilities is 2.0.
In fiscal 2024 the county used $75 million of reserves to complete capital projects. While pre-approved rate increases will support moderate levels of debt service coverage for next few years, they will not be enough to return cash levels to where they were before fiscal 2024, given the county's plans to spend between $23 million and $66 million on capital improvement projects, S&P said.
The county needs to complete the projects to address growing demand and to meet regulatory requirements.
The county told the Environmental Protection Agency it won't be able to meet the 2027 deadline for sewer improvements imposed by a consent decree. The county is negotiating an extension but that could result in fines, S&P said.
The county suffers elevated
S&P said the utilities have a stable and diverse service area economy and benefit from comprehensive capital improvement and financial planning.
Fitch Ratings rates the debt AA-minus with a stable outlook.
