Fitch Rates Weber Basin Water Conservancy District, Utah Water Ref Revs 'AA'; Outlook Stable
Source: Business Wire
--$7.2 million water revenue refunding bonds series 2010A rated 'AA'.
The bonds are expected to sell via negotiation on March 11. Proceeds will be used to current refund certain of the district's outstanding bonds, fund a debt service reserve and pay costs of issuance.
In addition, Fitch takes the following action on the district's outstanding parity revenue bonds:
--$69 million affirmed at 'AA' (prior to the refunding).
The Rating Outlook is Stable.
RATING RATIONALE:
--The district's role as the regional wholesale water supplier covering five counties and serving a customer base of 540,000 people provides a high degree of revenue stability.
--The district's financial performance has been strong, and projections indicate continued solid results.
--The five-year capital plan is very manageable and requires no additional debt.
--Credit challenges focus on the longer-term development and cost of additional water resources to meet future demand.
KEY RATING DRIVER:
--Maintenance of the district's strong metrics will be the key credit driver, particularly as additional water resources are developed.
SECURITY:
The bonds are payable from net system revenues, including one-time secondary system and impact fees. A property tax is levied but not pledged for the repayment of the revenue bonds.
CREDIT SUMMARY:
The district was created in 1950 to act as the local sponsor and operator of the Federal Weber Basin Project (WBP) and to further supply water resources to the population within its boundaries. The district covers over 2,500 square miles within five counties: Davis, Weber, Morgan, Summit, and a small portion of Box Elder. The district's primary purposes are to provide for the conservation and development of water resources within the district's boundaries; construct, operate and maintain water treatment plants and transmission line conveyance to cities and industries; and provide water for irrigation, secondary and other uses. Consistent with these objectives, the district serves as a provider of wholesale water from the WBP and other sources to various municipalities, industrial facilities, and agricultural enterprises within the district, with current supplies sufficient to meet demands for the next several years.
The district's financial performance has been strong with annual debt service (ADS) coverage averaging 2.5 times (x) over the past five years and at 2.4x in fiscal 2009. Projected coverage over the next five years is slightly diminished but should still approach historical norms, averaging 2.0x. Liquidity has also been very strong with $24 million in unrestricted cash and investments at the end of fiscal 2009, equal to 802 days cash on hand. Projections indicate that liquidity levels should remain strong over the next five years, even as it funds its capital expenditures entirely with cash.
The district's five-year capital improvement plan (CIP) totals a very manageable $38 million. No debt funding is anticipated until immediately after the five-year capital program when growth needs could necessitate the construction of a new water treatment plant to be funded with debt. Additionally, the district is looking at long-term water supply needs and anticipates that around 2030, another $20 to $30 million debt-financing will take place to help fund the Bear River Water Supply project.
Davis and Weber counties comprise about 90% of the district's population and are part of the Ogden-Clearfield metropolitan statistical area (MSA). Large employers in the area include Hill Air Force Base, Davis County and Weber County School Districts, Department of Treasury IRS and McKay-Dee Hospital Center. MSA unemployment rates have historically tracked Utah state levels and now stand at 6.6% compared to 6.4% for the state, and 9.7% nationally as of Dec. 2009. Median household income levels for the area are on par with the state (98%) and U.S. (104%) levels.
Applicable criteria available on Fitch's web site at www.fitchratings.com:
--'Revenue-Supported Rating Criteria', dated Dec. 29, 2009;
--'Water and Sewer Revenue Bond Rating Guidelines', dated Aug. 6, 2008.
Additional information is available at www.fitchratings.com.
Contact:
Fitch Ratings
Julie Seebach, +1-512-215-3740 (Austin)
Alan Gibson, +1-415-732-7577 (San Francisco)
or
Cindy Stoller, +1-212-908-0526
(Media Relations, New York)
cindy.stoller@fitchratings.com
