DuPont, WA's Series 2019 Water And Stormwater Revenue Bonds Assigned 'AA' Rating


CENTENNIAL (S&P Global Ratings) March 14, 2019--S&P Global Ratings assigned 
its 'AA' long-term rating to the City of DuPont, Wash.'s series 2019 water and 
stormwater revenue bonds. The outlook is stable. 

The planned par amount for the series 2019 water and stormwater revenue bonds 
is about $10 million. The city currently supports minimal state obligations 
secured by water and stormwater revenues. After 2019, the water and stormwater 
system will only support the series 2019 obligations. The city's water and 
stormwater system has no future debt plans at this point in time. 

"The rating reflects, in our opinion, an extremely strong enterprise risk 
profile and a very strong financial risk profile," said S&P Global Ratings 
credit analyst Alexandra Rozgonyi.

The enterprise risk profile reflects the system's: 

  • Service area in the broad and diverse Seattle-Tacoma-Bellevue, Wash.'s metropolitan statistical area 17 miles southwest of the city of Tacoma and 15 miles northeast of Olympia, the state capital;
  • Affordable service rates in the context of the service area's very strong income levels and the below-average county poverty rate;
  • Very low industry risk as a monopolistic service provider of an essential public utility; and
  • Strong operational management practices, represented by sufficient water supply to meet long-term demand from the Upper Salmon Springs Aquifer and the Outwash Aquifer, and by strong rate-setting practices.
The financial risk profile reflects the system's: 

  • Extremely strong pro forma all-in coverage metrics that we expect are sustainable, given planned rate increases and the lack of future debt plans;
  • Very strong liquidity, with about $6.3 million of cash for fiscal 2017, equivalent to about 790 days of operating expenses, which we expect will decline to fund capital projects but will stay very strong;
  • Modest capital plan at about $15 million over the next 10 years, including the amount planned to be funded from the series 2019 bonds, and our view that this is manageable, given the lack of future debt plans and the history of timely rate increases to support capital and debt obligations; and
  • Good financial management policies and practices represented by long-term projections, a detailed capital plan, and formalized policies.
We could raise the rating if the nominal value of unrestricted liquidity 
significantly rises to a level that is more consistent with the higher rating. 
In addition, we could raise the rating if economic development continues, 
providing a more diverse service area economy. 

We could raise the rating if the nominal value of unrestricted liquidity rises 
significantly to a level that is more consistent with the higher rating. In 
addition, we could raise the rating if economic development continues, leading 
to a more diverse service area economy. 

We could lower the rating if the system's all-in coverage declines from 
current projected levels or liquidity significantly drops more than planned. 
We could also lower the rating if the service area economy deteriorates, as 
represented by lower income. 
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