Capital Finance: Rating Water and Sewer Revenue Bonds

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Capital FinanceRating Water and Sewer Revenue
Bonds

• GFOAT Fall Conference, November 16, 2005
• Ted Chapman, Standard Poors
• Associate Director, Dallas

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What are the Main Rating Criteria?

• Underlying economic/employment base in and near
  the service area, as well as the customer base
  itself
• Past, present and projected future financial
  health
• Operations and the capital improvement plan
• Rates and fees
• Management
• Legal documents that support the bonds

CIP
rates
financial condition
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What are we seeing across the U.S.?

• Exploding CIPs
• Growth and sustainable development, esp. in South
  and West
• System rehabilitation, esp. in Northeast and
  Midwest
• Long-term water supply, pretty much everywhere
• Regulation
• Consent decrees from SSOs/CSOs
• CMOM/Asset management
• Additional SDWA/CWA requirements
• Increasing operating costs
• Utilities
• Drinking water reports
• Security and redundancy

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What are we seeing in Texas?

• Senate Bill 1
• 2002 state water plan projected 108 billion in
  capital needs by 2050
• Regional planning increasingly leading to
  regional service provision
• Houston and the two regional water authorities
• State watershed agencies such as BRA, LCRA and
  TRA
• Growing needs of other regional providers such as
  those in D/FW area
• Politics
• Siting of future reservoirs
• Conservation

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Rating Distribution, Texas W/S Issuers
NOTE revenue bond ratings onlydoes not include
G.O. ratings for tax-secured debt issued on
behalf of the water-sewer system
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Key Ratios, Texas Issuers (median)
Includes off-balance sheet debt
Thru September 15, 2005, with special thanks to
Chad Bivins and Jennifer Mann
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Questions?
Ted Chapman Standard Poors 500 North Akard,
Suite 3200 Dallas, TX 75201 (214)
871-1401 Theodore_Chapman_at_standardandpoors.com