Water woes sink Fitch's outlook for Corpus Christi to negative

Bloomberg News

The water crisis in Corpus Christi led Fitch Ratings to revise the outlook on the Texas city's AA issuer rating to negative from stable on Wednesday.

The rating agency cited "heightened uncertainty from the city's elevated water supply risk and the potential effects on its economy and overall credit quality, pending the timing and effectiveness of mitigation efforts that are underway or planned."

"A revision of the outlook to stable will depend on the city's ability to secure additional long-term water supply solutions within the next 12-24 months," Fitch said in a report.

Resolving the water shortage is the top priority, according to a Corpus Christi statement.

"We are working on numerous water supply projects that address and resolve our water issues," City Manager Peter Zanoni said in the statement. "We want to make sure everyone has enough water even during a drought, which is essential for our city's future and financial health."

Officials have said the city has $1 billion of projects underway that are aimed at producing 76 million gallons of water a day.

Corpus Christi Water, the primary water supplier for a seven-county region, is experiencing stage three drought conditions that triggered water-use restrictions. A potential level 1 emergency — indicating the water system is 180 days from supply not meeting demand — could happen as soon as next month under scenarios presented to the city council in March.

At a special meeting on Friday, the city council will discuss and get an update on the status of a contract for an inner harbor seawater desalination project. 

In October, both Fitch and S&P Global Ratings placed negative outlooks on their AA-minus ratings for Corpus Christi's utility system revenue bonds. Moody's Ratings in December downgraded the city's general obligation and combined utility enterprise bond ratings.