Fitch Affirms Alpena, Michigan Revs at 'A-'; Outlook Stable

In the course of routine surveillance, Fitch Ratings affirms its 'A-' rating on Alpena, Michigan's (the city) outstanding $2.7 million 1998 water supply and disposal system revenue bonds. The bonds are secured by net revenues of the city's water and sewer system. The Rating Outlook is Stable.

The 'A-' rating reflects solid debt service coverage and cash position, increasing but still affordable rates, and moderate capital needs. The rating also incorporates the system's flat customer base as well as the area's somewhat limited economic profile and high unemployment rates. Financial performance has been steady, benefiting from annual rate increases primarily to accommodate the issuance of junior lien debt in 2007 through the state revolving fund (SRF) loan program. For fiscal 2008, net revenues provided senior lien debt coverage of 4.1 times. Cash on hand was also favorable at 475 days. All-in debt service, including SRF obligations, is expected to remain healthy. Major system expansions were funded with the SRF obligations and the 2010-2015 capital plan, while sizable at approximately $17 million, appears to be flexible and future borrowing needs moderate.

The city, with an estimated population of 11,300, is located on the west shore of Lake Huron and serves as the county seat of Alpena County. Largest employers include government, education, health and long-term care, and manufacturing. County unemployment rates have consistently been above state and national averages. For May 2009, the county unemployment rate was a high 14.1%, slightly above the state's rate of 13.9%.

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