Standard & Poor's Ratings Services said it raised its rating to AA-plus from AA on Weber Basin Water Conservancy District, Utah's water revenue-secured bonds.
At the same time, Standard & Poor's assigned its AA-plus rating, with a stable outlook, to the district's 2013B water revenue bonds.
"The upgrade is based on the district's maintenance of strong reserves and coverage, even as the district addresses its ongoing needs as a wholesale provider," said Standard & Poor's credit analyst Corey Friedman.
The rating also reflects: a broad service area, in which the district provides mostly wholesale service to nearly 635,000 people; a strong cash position with a policy to maintain at least a year's worth of cash available for operations; and a sufficient water supply, with a policy to maintain two years of water in storage.
Lessening these strengths are the district's anticipated capital needs, fueled by anticipated growth demands, which could add to the district's debt burden and lead to increased rates.
A net revenue pledge secures the bonds, which the district will use to finance capital improvements and acquire certain assets of the Summit Water Distribution Co. to facilitate water distribution to the county area. The district will use some cash reserves to partially pay for the acquisition.
The bond resolution includes an additional bonds coverage requirement to maintain the rate covenant. The rate covenant requires annual coverage of debt service of least 1.25x; coverage funds may include any available and unrestricted funds, although they must meet debt obligations by at least 1x from net operating revenues. The district will not be maintaining a debt service reserve in association with this issue.
The stable outlook reflects the agency's expectation that the district will maintain its historically solid debt service coverage and cash position and that diversity in revenue-raising and forward-looking management will keep coverage at least at a good level as the district addresses its capital needs. The broad customer base and essential nature of the water provider add to the district's stability. During the current two-year outlook, the rating agency does not foresee an upward rating movement. Downward movement could occur, while not expected, if the district's financial picture were to significantly deteriorate.