Fitch Ratings affirms its 'A+' rating on Peace River/Manasota Regional Water Authority, Florida's (the authority) $128.0 million utility system revenue bonds. The bonds are payable from and secured by a pledge of net revenues of the authority's water system (the system). The Rating Outlook is Stable.
The 'A+' rating reflects the system's good financial performance, strong contract provisions, including take-or-pay provisions for water purchases, and manageable capital needs. Offsetting risks include slow debt amortization and growth challenges related to above-average population gains. The system is also facing drought conditions, which combined with rapid service area growth, has placed some near-term operational financial pressure on the system. However, operations are stable and Fitch expects the authority will continue to take necessary actions to provide adequate water supply to its member agencies and preserve its financial metrics.
Financial performance has been good, with senior annual debt service (ADS) coverage levels averaging 2.3 times (x) over the fiscal 2004-2008 period. Projected ADS coverage for the system over the next five years is expected to diminish slightly but still remain adequate, averaging around 1.8x. Financial margins have also been favorable, averaging 252 days cash on hand and financial projections point towards an improvement in reserves, given projected minimal non-cash funding of capital improvement program (CIP) projects.
The system's CIP for fiscal 2010-2014 is $131 million compared with $183 million for the fiscal 2007-2011 five-year plan. Approximately 47% is forecasted to be debt-funded, with the remainder to be funded with grants and other non-cash sources. The bulk of the authority's near-term capital needs are for an ongoing regional loop system implementation with an estimated cost of $120 million. The integrated loop system will extend the authority's existing pipeline to access new supplies and deliver more water to its member agencies. The system will also improve conjunctive use opportunities, allowing for the use of surface water when plentiful or groundwater during times of drought.
The authority is an independent special district and regional water supply authority created by an interlocal agreement in 1982 (amended in 2005). The authority, which is contracted to provide wholesale water to four member public agencies (the Counties of Charlotte, Sarasota, DeSoto and Manatee) and one non-member public agency (City of North Port), operates under a Master Water Supply Contract (MWSC) adopted by all members in 2005 (adopted concurrent with the amended interlocal agreement). The authority's large and diverse service area population currently includes approximately 908,000 residents and is expected to reach over 1 million by 2020. To accommodate the service area growth, the authority's treatment capacity was doubled with the Regional Expansion Project (REP) that began in fiscal 2006. The authority transports, stores, distributes, and treats water that is derived primarily from the Peace River. Charlotte and Sarasota Counties together have been allocated 90% of authority water in fiscal 2010.
Population growth within the authority's service area has averaged approximately 8% over the last four year period, though growth has slowed with the economic downturn. The estimated unemployment rate of the service area in June 2009 was 11.6%, above state and national averages.
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Christopher
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or
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Email: cindy.stoller@fitchratings.com