Standard & Poor’s said it revised its outlook to positive from stable and affirmed its BBB long-term rating on the Scranton Sewer Authority’s sewer revenue bonds based on improving financial margins aided by rate increases.
The rating reflects Standard & Poor’s view of the Pennsylvania authority’s large capital needs related to deferred maintenance and compliance with a consent decree, which will require additional rate increases and debt issuance.
It also take into account a limited local service-area economy characterized by above-average unemployment and adequate wealth indicators, along with sound financial performance as demonstrated by good debt-service coverage and strong liquidity.
In addition, the rating reflects analysts’ assessment of the authority’s high debt-to-plant ratio, rates that have experienced pressure in recent years despite remaining affordable, and a relatively stable customer base.
The positive outlook reflects Standard & Poor’s view of the sewer agency’s willingness to adjust rates given its significant, consent-order-driven capital improvement needs.
“The authority’s continued willingness to implement timely rate increases to provide consistent coverage and liquidity margins together with a formalized funding plan for the capital improvement plan, could result in our raising the rating,”’ said Standard & Poor’s credit analyst Paula Costa.