Two positive rating signals buoy Corpus Christi utility system ahead of deal

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Ahead of a Corpus Christi utility system $300 million revenue bond sale, two rating agencies that issued multi-notch downgrades earlier this year sent positive signals on Tuesday.

S&P Global Ratings ended a CreditWatch with negative implications review, and Fitch Ratings revised its outlook to stable from negative.

Both affirmed their ratings, while warning of continued credit risks related to the drought-battered Texas city's efforts to boost water supply over the longer term.

S&P had placed the utility on CreditWatch in May after downgrading the utility's system's rating two notches to A. It affirmed the A rating Tuesday, assigning a negative outlook due to the system's "exposure to project execution risk for identified supplemental water supply projects and governance risk associated with city council turnover every two years, which can meaningfully hinder strategic long-term water supply planning."  

"Despite recently improved water supply conditions due to summer rainfall events and the city council's credit-supportive rate-setting practices, if the utility does not successfully diversify and supplement its water supply resources over the next two years to offset chronic drought risk, we could lower the rating," S&P said in a report.

Fitch Ratings, which dropped the system's AA-minus rating to A-minus with a negative outlook in June, affirmed that rating and revised the outlook to stable, saying it reflects "a meaningful reduction in near-term water demand curtailment risk following a significant improvement in water supply conditions, a key driver that is fundamental to operating and financial stability." 

"Long-term water supply development and related capital spending needs remain key credit considerations and are incorporated into the current rating," the rating agency added. 

In a statement announcing the rating actions, the city said the system's senior-lien revenue bonds will finance infrastructure and water supply initiatives.

"The city remains focused on sound financial management while making long-term investments to support a reliable utility system and strengthen Corpus Christi's water supply for the future," the statement said.

The city council gave final approval in July to water rate hikes effective Jan. 1 to support current and future debt, as well as water system operations. 

BofA Securities was named as the lead underwriter for the utility deal, according to a May voluntary disclosure notice filed to the Municipal Securities Rulemaking Board's EMMA website.

Summer rainfall, along with $1.1 billion of groundwater, wastewater reuse, and other projects aimed at producing 66 million gallons of water daily, enabled the city to revise its drought status from Stage 3 to Stage 1 and postpone the onset of a potential Level 1 emergency — indicating the regional water system is 180 days from supply not meeting demand — to September 2028 from a previous September 2027 projection. 

The city council earlier this month once again voted against a plan for Inner Harbor seawater desalination by rejecting an initial design-build contract for the project.  All nine council member seats, including the mayor, are on the Nov. 3 ballot.

In July, Moody's Ratings affirmed the utility system's A1 rating with a negative outlook, ending a review it launched in April for a possible further downgrade after lowering the rating in December.  

Corpus Christi Water, a city agency, is the primary water supplier for a seven-county region. About $1.5 billion of utility system debt was outstanding as of Sept. 30, 2025.