DALLAS - The San Antonio Water System has won upgrades across the board after Moody's Investors Service and Fitch Ratings joined Standard & Poor's in the latest revision.
Standard & Poor's lifted the senior-lien revenue bonds one notch to AA from AA-minus in November while boosting the junior-lien credit to AA-minus from A-plus. The other agencies came through last week, with Moody's lifting the senior and junior-lien rating to Aa3 from A1, while Fitch matched the Standard & Poor's move.
Outlooks were shifted to stable from positive after the moves.
"We are extremely pleased by this news," said Doug Evanson, SAWS senior vice president and chief financial officer. "This will result in millions of dollars of savings for SAWS ratepayers because we will be able to borrow money at lower interest rates."
SAWS currently has $1.14 billion of senior-lien revenue bonds outstanding, with $234.8 million of junior-lien debt and $1 million of subordinate-lien revenue bonds that were upgraded to A-plus from A by Fitch.
SAWS is working under a five-year, $1.5 billion capital improvement program, which includes $739 million for wastewater projects.
As the major water provider in Bexar County, the city-owned SAWS serves 348,000 water and 389,000 wastewater retail and wholesale customers over 621 square miles. About 91% of customers are residential. With San Antonio's population expected to double by 2050, the system's challenge has been to develop supplemental water resources beyond the Edwards Aquifer.
Starting in 2002, the system began adding several modest non-Edwards Aquifer water sources to its portfolio. Additional large-scale projects are expected to increase the composition of non-Edwards Aquifer water to 51% of total supplies by 2028.
"Capital costs associated with these projects are significant and will require a sizeable amount of additional leveraging in the future," Fitch analysts noted.
Last week, the San Antonio City Council approved a 3.9% rate adjustment, beginning Thursday.
"These additional funds will go directly back into our community to repair and replace aging water and wastewater infrastructure," said SAWS president and chief executive officer Robert R. Puente. "It also will provide funding to develop critical water supply projects, which require significant capital investment."
Based on the average SAWS residential bill of 7,788 gallons of water service and 6,178 gallons of wastewater service per month, the total estimated increase would be about $1.63 per month.
Funding from the rate adjustment will be used in three major areas: water supply, infrastructure, and operations.
Mayor Phil Hardberger said SAWS staff worked with the city of San Antonio to arrive at the 3.9%.
"We're not here to vote today because we want SAWS to make a profit," Hardberger said. "This water utility belongs to the citizens of San Antonio. We're here to make sure we stay ahead of the curve and protect our water resources."
"Despite the rate hikes, SAWS's average monthly bill totals under $43, which is lower than all other Texas urban systems except El Paso, affording the system sufficient rate flexibility," Fitch analysts noted. "Incorporating planned rate increases results in sound debt service coverage on all bonds."