HomeMy WebLinkAboutIR 9714 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 9714
To the Mayor and Members of the City Council March 17, 2015
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*a SUBJECT: STANDARD & POOR'S WATER & SEWER CREDIT REVIEW—
r0K?CL MARCH 2015
On March 3, 2015, Standard & Poor's (S&P) released a credit report affirming the City's AA rating
with a stable outlook on our water and sewer system revenue debt. This report was released
subsequent to a call between S&P and City staff wherein a system update was provided to the credit
analysts. This call is part of a traditional surveillance process that each of the rating agencies
conduct to ensure the underlying rating has not changed due to events unknown to the analysts.
S&P cited the following highlights as part of the confirmed ratings:
• Large and diverse retail and wholesale service area — Wholesale customers accounted for
20% of fiscal year 2014 revenue;
• Willingness to raise rates regularly and pass along wholesale water cost increases; and
• Good financial performance, evidenced by the maintenance of strong total debt service
coverage before transfers, and good liquidity.
The report further states: "Recent 7.3% water and 4.8% sewer increases, effective in January 2015,
raised the combined utility rate to $69.28 for 1,000 cubic feet of water and wastewater service; when
annualized, we believe this is an affordable 2% of the city's median household effective buying
income."
There are three businesses that rate the City's long-term debt: Moody's, S&P, and Fitch. Each of
these entities specialize in conducting independent credit reviews, evaluating risk, and reviewing
financial performance in order to determine our "score" for investors to utilize in their analysis of
potential investment opportunities. Our current water and sewer ratings from each of the firms are as
follows:
Mood 's Investor Services Aa1
Standard & Poor's AA
Fitch AA
The table below depicts the available ratings along with the definitions of how investors evaluate the
credit worthiness of the investment and the issuing organization:
Mood 's S&P Fitch Definitions
Aaa AAA AAA Prime. Maximum safety for investors. Lowest interest costs.
Aa1 AA+ AA+ High grade and high quality investments.
Aa2 AA AA
Aa 3 AA- AA-
A1 A+ A+ Upper medium grade investments.
A2 A A
A3 A- A-
Baa1 BBB+ BBB+ Lower medium grade investments.
Baa2 BBB BBB
Baa3 BBB- BBB-
Bal BB+ BB+ Non-investment grade instruments.
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 9714
To the Mayor and Members of the City Council March 17, 2015
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*a SUBJECT: STANDARD & POOR'S WATER & SEWER CREDIT REVIEW—
r0K?CL MARCH 2015
Ba2 BB BB Speculative investments.
Ba3 BB- BB-
B1 B+ B+ Highly speculative investments.
B2 B B
B3 B- B-
Caa1 CCC+ CCC Substantially risky investment.
Caa2 CCC --- Investments and company in poor standing
Caa3 CCC- ---
Ca --- --- Extremely speculative
C --- --- May be in default
--- --- DDD Default
--- --- DD
--- D D
Beginning in fiscal year 2015 as part of the annual financial cycle, the City will be making
presentations to each of the three rating agencies in the summer. These presentations will cover
updates on both our tax supported and our revenue supported debt. The City's financial advisors,
First SouthWest and Estrada & Hinojosa will be supporting these efforts, which will include reviews of
on both our outstanding debt and our plans for new debt issuances. We look forward to previewing
this process in an upcoming presentation in May of 2015.
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