Standard & Poor’s upgraded its long-term and underlying ratings on the Olivenhain Municipal Water District’s certificates of participation to AA-plus from AA ahead of a $19.7 million bond issue.

“The raised rating is based on our opinion of the district’s projected strong debt service coverage on the proposed series 2009 bonds and outstanding parity bonds,” said analyst Misty Newland.

The 48-square-mile water district, which is located 25 miles north of downtown San Diego in affluent suburban San Diego County, plans to use the upcoming bond issue to fund expansion of its treatment plant and other projects. 

Standard & Poor’s said the district has strong cash balances and debt service coverage ratios. The district’s net revenues available for debt service were four times debt service in fiscal 2008, while cash balances at the end of the fiscal year were equal to 399 days of expenses.

The district has also approved rate increases for the next five years.

“We believe these increases will allow management to react in a timely manner to any unexpected changes in revenue or expenditure trends,” Newland said.

Those strengths are “tempered” by the district’s reliance on wholesalers for its water supplies and its goal of cutting wholesale reliance by 40% to 50% over the next decade, Newland said in a report.

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