Auburndale, FL Utility Revenue Bond Outlook Revised To Positive On Lower Reliance On One-Time Revenues, Fewer Transfers


CENTENNIAL (S&P Global Ratings) Jan. 11, 2019--S&P Global Ratings revised its 
outlook to positive from stable and at the same time affirmed its 'A-' 
underlying rating (SPUR) on Auburndale, Fla.'s outstanding utility revenue 
bonds. 

"The positive outlook reflects our opinion that there is a one-in-three chance 
we could raise the rating if management continues to post strong financial 
metrics by keeping annual transfers to the general fund below management's 
target of $3 million, lowering reliance on one-time growth-related fees, and 
maintaining a good liquidity position," said S&P Global Ratings credit analyst 
Alexandra Rozgonyi. "We view the lack of a formal policy to be a credit 
weakness, but if management sustains lower transfers, we could we view this 
consistency positively."

The rating reflects our view of the combined system's very strong enterprise 
risk profile and adequate financial risk profile.

The enterprise risk profile reflects our view of the combined system's:

  • Location in the Lakeland-Winter Haven metropolitan statistical area economy, providing strength and diversity to local employment opportunities;
  • Affordable system rates in the context of the service area's good income metrics;
  • Very low industry risk as a monopolistic service provider of an essential public utility; and
  • Good operational management assessment given sufficient water supply to meet current demand, although management is evaluating both future water supply needs for long-term reliability and sufficient future wastewater treatment capacity to meet demand.
The financial risk profile reflects our view of the combined system's:

  • All-in coverage metrics that we consider good, although reliant on one-time revenues, which we expect to be maintained at a level we consider good given the lack of future debt plans and capital plan that we believe is manageable;
  • Good liquidity position, with about $3 million of unrestricted cash for fiscal 2017, equivalent to about 128 days of operating expenses;
  • High debt-to-capitalization ratio at about 63%, which we expect to be manageable given the lack of future debt plans; and
  • Good financial management assessment given practices and policies that we believe are transparent and comprehensive in most, but not all, areas.
We could lower the rating if the service area economy deteriorates, leading to 
a worsening of our market position score and overall enterprise risk profile 
score. 
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