Credit Rating for
Separate-Lien Water Utility Revenue Bonds
The measure shows the general creditworthiness of the Utility and its ability to meet its financial commitments as assessed by Standard & Poor’s (S&P), a global ratings agency. Since Austin Water sells revenue bonds regularly to finance infrastructure improvements, a strong bond rating is critical to minimizing debt financing costs. Revenue bonds fund improvements for the City’s enterprise activities and are repaid from revenue of the corresponding enterprise and not property taxes. An ‘A’ bond rating or above is considered a good credit risk for investors.
The credit rating for separate-lien water utility revenue bonds is assigned by S&P when Austin Water issues new revenue bonds, generally every 15 to 24 months.
FY 2015-16 Results
The goal established for this measure is to maintain the AA credit rating for FY 2015-16. Austin Water met the goal of an AA credit rating assigned from S&P.
Assessment of Results
The AA rating indicates Austin Water has a very strong capacity to meet its financial commitments and is just below AAA and AA+ in terms of the highest possible credit ratings assigned by rating agencies. Over the last several years, Austin Water’s financial stability has been challenged by the severe drought in central Texas, resulting in water use restrictions, water demand reductions, and revenue uncertainty and volatility. In response to these issues, Austin Water has made improvements to its rate structure to reduce revenue volatility and has utilized debt refinancing and defeasances (early payoff of debt) to achieve significant debt service savings over the next five years. These actions and recent City Council-approved rate increases have improved the Utility’s financial position.
Austin Water must continue efforts to balance financial stability with service reliability and quality, along with customer affordability.
For more information contact Joseph Gonzales, Utility Budget and Finance Manager, at (512) 972-0131.