Standard & Poor’s Upgrades City of Fort Lauderdale’s Water and Sewer Bond Rating to AA+
Agency cites system's consistently strong financial profile
Fort Lauderdale - Standard & Poor’s Ratings Services, one of the world’s leading independent credit rating agencies, has raised its rating on the City of Fort Lauderdale’s water and sewer system revenue bonds from 'AA' to 'AA+'. In a concurrent move, Standard & Poor's has assigned its 'AA+' long-term rating to the system's series 2012 water and sewer revenue refunding bonds. The outlook on all ratings is stable.
"The higher rating reflects our view of the [City of Fort Lauderdale water and sewer] system's consistently strong financial profile aided by management's demonstrated willingness to adjust rates on a regular, recurring basis," said Standard & Poor's credit analyst Paula Costa.
“We are extremely pleased with the AA+ rating from S&P,” said City of Fort Lauderdale Mayor John P. “Jack” Seiler. “It reflects our sound fiscal management, validates the capital investments we have made to upgrade the City’s water and sewer system, and affirms our strategic plan to continue to maintain and enhance our utilities moving forward.”
Standard & Poor’s pointed to several additional factors that contributed to the bond rating upgrade, including:
- A regional service area serving a predominately residential customer base located within the city, which includes long-term wholesale customers outside the city limits;
- Sufficient capacity to meet current system requirements with additional system capacity improvements being developed for future customer needs; and
- A moderate five-year capital improvement program with no additional borrowing requirements.
In its analysis, Standard & Poor’s noted that the City of Fort Lauderdale water and sewer system’s finances “continue to be healthy, characterized by strong debt service coverage and good liquidity margins.”
“Higher bond ratings enable the City to borrow and repay money at a much lower interest rate which translates into millions of dollars in savings for our taxpayers and ratepayers,” added Mayor Seiler. “Our strong financial position helped us secure a bond rating upgrade, while continuing to provide our water and sewer customers with the lowest rates in Broward County.”
According to a survey of Broward County municipalities, the City of Fort Lauderdale is the lowest cost provider at the 3,000 and 5,000 gallon per month residential use level for systems providing both water and sewer service. Sixty-one percent (61%) of all residential bills in Fort Lauderdale are 5,000 gallons per month or less. The City’s rates at this level are the lowest in Broward County.
Standard & Poor's stable outlook reflects the agency’s assessment of the City of Fort Lauderdale water and sewer system’s historically strong coverage aided by the City Commission's willingness to adjust rates and recent adoption of an annual rate indexing policy. The residential nature of the system's customer base and presence of long-term wholesale contracts, provide additional rating stability. Based on these expectations, Standard & Poor's does not believe a rating action is likely over the two-year parameter of the outlook.
Standard and Poor’s decision to upgrade the City’s water and sewer system revenue bonds follows an earlier action taken by Moody’s Investors Service affirming the City’s Aa1 rating. Moody’s rating was based on the “strength of a well-managed system supported by a strong liquidity position and competitive rate structure; a well-managed capital program; narrow but still favorable overall debt service coverage; and adequate intermediate-term water supply and system treatment capacities.