Moody’s Investors Service Tuesday placed its A2 rating on Stockton Wastewater Enterprise 1998 and 2003 certificates of participation on watchlist for possible downgrade, saying the utility has violated its debt service covenant.
The enterprise also faces significantly diminished fiscal reserves and the pressing need to enact significant rate increases to preserve the funds currently being used to make debt service payments, according to Moody’s.
The utility covenanted to set rates and charges sufficient to maintain net wastewater revenues that are least 1.25 times debt service. For fiscal 2010, it anticipates having net revenues that provide 0.79 times coverage of debt service, Moody’s said.
The enterprise currently has $22 million in reserves available to use for debt service, which means that if no actions are taken, there are sufficient funds to pay debt service through fiscal 2012. The 2003 COPs mature in 2024. The 1998 COPs mature in 2030.