NEW YORK--(Business Wire)--
In the course of routine surveillance, Fitch affirms St. Augustine, Florida's
approximately $26.4 million in water and sewer revenue bonds at 'A'.
The 'A' rating reflects the system's sound debt service coverage, adequate legal
provisions, and above-average rates. The utility's service area includes the
city limits and a portion of unincorporated St. Johns County surrounding the
city. Water and sewer system accounts have increased a rapid 4.4% over the past
five years, with most of the growth occurring outside of the city. Rates are
comparatively high while income levels within the city are below average.
Customers outside city limits are charged a 25% surcharge on water and sewer
rates. Growth is expected to level off over the next few years with roughly a 3%
annual increase in customer base projected.
Water supply is derived from the city's wellfield, which extracts water from the
Floridan aquifer, and has an 8.55 millions of gallons per day (mgd) withdrawal
capacity, well above current demand. A recent expansion to the water treatment
plan increased treatment capacity to 6.0 mgd. Based on current flows, the system
has roughly 40% capacity remaining which should be sufficient to handle
projected growth in system demand over the long term. The city's wastewater
system provides collection and treatment with a maximum capacity of 4.95 mgd.
Average daily flows (average gallons daily [agd]) have historically been
significantly greater than water demand due to a large amount of infiltration
and inflow (I&I) resulting from clay piping. Recent capital efforts to reduce
I&I have contributed to agd decreasing over 20% in the last five years and
becoming comparable to system water flows.
System financial operations are sound, providing strong debt service coverage.
Coverage has increased rapidly over the past few years largely driven by
connection fees and capital contributions from the rapid development of
unincorporated areas of the county. Fiscal 2007 results show 5.8 times (x)
maximum annual debt service coverage from all pledged revenues. Excluding
connection fees and capital contributions, coverage declines to a still healthy
2.3x. Unaudited fiscal 2008 total coverage decreased to 3.6x reflecting the
slowing housing market. Recurring revenues generated 3.1x coverage. While the
system does not have formal projections, coverage is expected to remain
adequate. Liquidity is sufficient with 101 days cash on hand for fiscal 2007.
Long-term capital needs are manageable focusing on general maintenance and the
continuation of a 10-year plan to implement slip-line system piping. The system
is currently under a consent order mandating the replacement of a wastewater
treatment plant outflow pipeline. Construction on the project is expected to
begin this month with completion scheduled for the end of the fiscal year.
Related penalties are minimal.
Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, www.fitchratings.com. Published ratings, criteria and
methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.
Fitch Ratings
Rachel A. Barkley, +1-212-908-0514 (New York)
Kelly McGary, +1-813-224-0492 (Tampa)
Media Relations:
Cindy Stoller, +1-212-908-0526 (New York)
cindy.stoller@fitchratings.com
Copyright Business Wire 2009
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