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HomeMy WebLinkAboutIR 10013 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 10013 To the Mayor and Members of the City Council May 16, 2017 h�T�i7 Page 1 of 2 �i �i7 Y *a SUBJECT: RATING AGENCY RESULTS ASSOCIATED WITH THE WATER AND rrn f SEWER 2017 DEBT PLAN Background As part of the City's 2017 debt plan and the upcoming bond offerings, the City completed rating agency presentations to Moody's, Fitch and Standard and Poor's on April 25, 2017 for the City's Water and Sewer System Revenue Refunding and Improvement Bonds, Series 2017A. The following presents the assigned ratings. Rating Summary Moody's- Aa1 with a Stable Outlook Fitch: AA with a Stable Outlook Standard and Poor's- AA+ with a Stable Outlook These ratings are consistent with our prior year ratings for the Water & Sewer System. Highlights of Rating Agency Comments Moody's noted that the "Aa1" rating reflects: • Strong characteristics of a large system that acts as a regional provider of water and sewer services • Strong financial management and capital planning • Satisfactory debt coverage with a manageable debt profile. The stable outlook reflects the system's timely rate adjustments needed to maintain steady debt coverage and the continuance of the trend of improving days cash on hand. While the City has received one of the highest ratings, Moody's did note several areas of improvement. These include: weak liquidity for our rating category; declining water consumption; and weak legal provisions of our debt structure. Moody's also commented on our overall growing pension liability and our inability to maintain a "tread water" position. Fitch noted the following items in their rating report: • Financial performance has stabilized following several years of fluctuation and cash balances have continued to gradually improve • Past practice of rate adjustments and continued plan for future rate adjustments • The system rates remain affordable and retain sufficient flexibility • The system continues to record steady customer growth and the city's extraterritorial jurisdiction is sizable and provides opportunity for future annexation and growth • Rate pressure are associated with Tarrant Regional Water District's (TRWD) capital plan • Existing debt ratios compare favorably to Fitch's `AA' medians ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 10013 To the Mayor and Members of the City Council May 16, 2017 h�T�i7 Page 2 of 2 �i �i7 Y *a SUBJECT: RATING AGENCY RESULTS ASSOCIATED WITH THE WATER AND rrn f SEWER 2017 DEBT PLAN • The city has a large and diverse regional economy and the city's wealth levels are on par with the region and the State of Texas Standard & Poor's noted the following rating factors in their rating report: • The city's wastewater system is an operational strength. The facilities are sufficient to meet the city's 114-mgd average flow and the wastewater treatment plant permit does not need to be renewed until the end of the decade. • S&P's financial management assessment is "strong," indicating the city's practices are strong, well embedded, and likely sustainable. • The city performs most of the best practices S&P believes are critical to supporting credit quality and these are well embedded in the city's daily operations and practices. This includes comprehensive long-term planning for both the operational and capital budgets, regular monitoring of year-to-date and budget-to-actual results, and policies speaking to minimum working capital levels. • S&P's operational management assessment (OMA), for the City was "good," indicating the city's operational and organizational goals are generally well-aligned, even if some challenges exist. The OMA of "good" includes a firm, long-term water supply by way of TRWD and the city has proactive capacity, management, operations and maintenance programs for its sewer system. In addition, Standard & Poor's noted the city's continued economic growth and diversity, limiting cyclicality from sectors such as energy and commodities, as well as a housing market that they do not currently view to be in a bubble, as factors that enhance rating stability. Next Steps in the Process The bonds will be sold on a competitive basis and priced in the market on May 23, 2017. Subsequent to pricing, the City will submit the transactions to the Texas Attorney General for approval. Closing of the transactions is anticipated to occur on June 27, 2017. Staff will prepare an Informal Report after the sales are completed. If you have any questions, please call Aaron Bovos, Chief Financial Officer, at 817-392-8517. David Cooke City Manager ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS