The Earth Times has the story:
NEW YORK – (Business Wire) Fitch Ratings assigns an initial underlying ‘AA’ rating to Metropolitan Sewerage District of Buncombe County, North Carolina’s (the district) approximately $95.1 million in outstanding sewerage system revenue bonds. The bonds are secured by a senior lien on net revenues of the district. The district has no plans to issue bonds at this time. The Rating Outlook is Stable.
The ‘AA’ rating is based primarily on the district’s strong financial management demonstrated by consistently healthy debt service coverage and exceptionally strong liquidity levels. Additional credit strengths include the district’s below average rates and manageable future capital needs prudently financed with a significant amount of pay-as-you-go funding. The district’s above-average system leveraging coupled with weak income levels throughout the service area are also reflected in the ‘AA’ rating.The district was formed in 1962 initially to provide sewerage treatment for municipalities and sanitary districts located in Buncombe County, NC. In 1990, as part of a significant sewer consolidation plan, the district expanded its service by acquiring all of the separate sewerage collection systems located within the county. A twelve-member board, appointed for three-year terms by the governing bodies of the municipalities served by the district, is responsible for the operations, maintenance, and capital improvements of the district. The district’s wastewater treatment plant provides a total of 40 million gallons daily (mgd) of treatment capacity and serves approximately 48,000 customers located throughout the City of Asheville, five smaller municipalities within the county, parts of the unincorporated areas of the county, and a portion of northern Henderson County. Income levels throughout the slowly growing service area measure slightly below the state level and well below the national average. The county’s unemployment rate, measured at 3.4% in December 2007, continues to trend downward, despite a 4% decline in manufacturing-related employment since 2002. With sole rating-setting authority, the district prudently adopts measured rate increases on an annual basis. Rates reportedly are below the regional average and are forecasted not to exceed an increase of 4% annually through at least fiscal 2012.
Financial operations are a credit strength marked by consistently healthy debt service coverage and high liquidity levels. The district finished fiscal 2007 with over 1,000 days of cash on hand, and coverage by net revenues, which includes facility fees and tap fees, on annual debt service was 2.4 times (x). Fitch believes the district’s comprehensive financial projections are conservative, reflecting reduced revenue from facility and tap fees attributable to a slowing housing market and incorporating no revenue growth from industrial users, reflecting the manufacturing decline. As such, debt service coverage is forecasted to decline to a still solid level of 1.8x by fiscal 2012. The district’s policies prudently require maintenance of a minimum debt service coverage level of 1.5x and unrestricted cash balances equal to at least $5 million. The district is consistently in excess of these policies.
Following the sewer consolidation that took place in 1990, the district made a significant amount of capital investment to upgrade, repair, and replace where necessary the sewer lines it acquired. This could be seen in drainage unblocking repairs in somewhere like southend. As a result, the district’s facilities are reportedly in good condition and all required permits are current. Planned capital financing is manageable, totaling $78 million over the next five years, primarily for general sewer maintenance. Funding for future capital needs will be almost evenly split between debt issuance and pay-as-you-go financing. A $24 million parity debt issuance is planned for fiscal 2011, though the timing may be accelerated if market conditions are favorable.