Outlook turns negative for five Texas utility districts in Harvey's wake
DALLAS – S&P Global Ratings’ outlook for five special purpose districts in the hurricane-stricken region of Southeast Texas has shifted to negative.
The districts are: Cinco MUD No. 8, rated A-minus; Orange County Water Control and Improvement District No. 1, rated A-minus; Grand Lakes MUD No. 1, rated A; Fort Bend County Levee Improvement District No. 19, rated BBB-plus; and Fort Bend County MUD No. 149, rated BBB.
The Cinco district west of Houston in the Katy Independent School District reported that 90% of its 1,003 homes were flooded. With debris removal costs estimated at $500,000, the district reported that there was no significant damage to its water and wastewater system and that there was no interruption of service during the hurricane.
The 442-acre district's assessed value was $307 million, with a property tax rate of 58 cents per $100 value, S&P noted.
“We believe that the significant damage to district homes could result in a material reduction in AV for fiscal 2019,” analysts said.
The Orange County WCID No. 1, in western Orange County, covers 8,006 acres and serves the City of Vidor six miles east of Beaumont. The district reported that 55% of homes in the district were flooded, and water treatment facilities suffered damage of up to $6 million.
“As of fiscal year-end June 30, 2016, it maintained adequate general fund reserves, with available fund balance of $1.9 million or 50% of operating expenditures, and what we consider low debt service fund balance, with $677,000 covering 26% of maximum annual debt service,” S&P said. “However, the MUD does maintain approximately $3 million in a contingency fund.”
The 393-acre Grand Lakes district 22 miles southwest of downtown Houston within the Katy ISD reported that 35% of its 449 homes were flooded. The district's board has voted for a disaster reappraisal, which means, to the extent that property is reappraised to reflect values immediately after the disaster, the MUD must prorate the taxes on the property for the fiscal year ending Aug. 31, 2018, analysts said.
“To the extent that AVs are affected by the reappraisal, operating and debt service tax levies may be affected for the current fiscal year,” analysts said.
The Fort Bend LID serves approximately 543 acres in Fort Bend County MUD No. 149 and 235 acres in Fort Bend County MUD No. 129. It lies within and around Missouri City and within Fort Bend ISD west of Houston. The district is part of a 3,700-acre master planned community known as "Riverstone."
Fort Bend MUD No. 149 reported 570 homes, or 31% the LID's total, experienced flooding ranging from a few inches to 2 feet. The LID's board has also voted for a reappraisal taking into account the storm damage.
“Although the district has very strong reserves, the current tax rate and debt position, in our opinion, are high,” S&P said. “Given the reappraisal, we believe there is potential for the tax rate and debt position to be comparatively higher.”
Fort Bend County MUD No. 149 has reported 570 homes, or 48% of its total, were flooded from a few inches to 2 feet in depth. Flooding occurred when rainfall from Harvey inundated the pump station for the Steep Bank Creek watershed after its Aug. 25 landfall, S&P said.