Tampa Bay Water's underlying rating was downgraded to AA from AA-plus by S&P Global Ratings, which cited a correction of an earlier misapplied criteria.
The rating carries a stable outlook.
After the anticipated issuance of 2026A and 2026B bonds, the downgrade will affect $1.3 billion in debt.
Tampa Bay Water sells wholesale water to six member governments. Its service area has more than 2.6 million residents in the Tampa area.
S&P said it erroneously applied a one-notch upward adjustment from the rating of the weakest member of the Tampa Bay Water group of customers. When there are 10 or few members and no explicit or implicit promise by members to step up in case of a shortfall by members, S&P focuses on the weakest-link to determine the rating.
TBW has historically maintained robust liquidity and is expected to improve this further in coming years, S&P said. Median household effective buying income is at or near national levels. The utility has moderate debt levels, although this is expected to weaken in the medium term.
TBW also benefits from credit-supportive management policies and practices, S&P said.
S&P said TBW faces heightened environmental risks but the management's routine vulnerability assessments and regularly updated capital improvement plan focuses on resiliency offset these risks.
"We are disappointed in the error," said Christina Sackett, TBW chief financial officer, about the path that led to S&P's earlier rating. The downgrade "doesn't reflect on the financial position of the agency."
She said Moody's, in its report on the utility, points to many credit positives.
Tampa Bay Water's debt is rated Aa1 by Moody's Ratings and AA by Fitch Ratings, both with stable outlooks.
Sackett said TBW would bring Series 2026A new money bonds around $292 million for expansions to a surface water treatment plant and Series 2026B refunding bonds around $64 million to the market on Aug. 4 or 5. JP Morgan is the lead underwriter on the deal.
Florida water utilities are taking
