Fitch Rates El Paso, Texas Water Sewer Rfdg Bonds 'AA'.AUSTIN, Texas -- Fitch Ratings Fitch Ratings
An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. assigns an 'AA' rating to El Paso, TX's $34.8 million water and sewer revenue refunding bonds, series 2005B, scheduled to sell on March 21 via negotiation through a syndicate led by Bear, Stearns & Co, Inc. In addition, Fitch affirms its 'AA' rating on the city's outstanding water and sewer revenue debt, totaling $391.8 million in senior lien senior lien n. the first security interest (lien or claim) placed upon property at a time before other liens, which are called "junior" liens. (See: mortgage, deed of trust, lien, UCC-1) bonds. The Rating Outlook is Stable.
The bonds are special obligations of the city payable solely from and secured by a first lien on and pledge of the net revenues of the city's waterworks waterworks: see water supply. and sewer system. Proceeds will be used to refund a portion of the city's outstanding waterworks and sewer system debt for interest cost savings and to pay costs of issuance.
Fitch's 'AA' rating reflects El Paso Water Utilities' (the system) solid debt service coverage, strong legal provisions, competitive rate structure, and extensive financial, capital, and water resource planning. Offsetting risks include the below-average income levels of its customer base coupled with a large capital plan that will require additional, albeit modest, rate increases. Management's strategy to diversify its water supply has resulted in the stabilization of its largest groundwater source, the Hueco Bolson bol·son
n. Chiefly Southwestern U.S.
A flat arid valley surrounded by mountains and draining into a shallow central lake.
[American Spanish bolsón, augmentative of Spanish bolsa, aquifer, vastly extending its useful life. The demonstrated willingness to adopt large rate increases in fiscal 2005 will enable the system to fund one-third of its 10-year capital plan with current resources. In addition, the prospects appear favorable for ongoing community support to provide a reliable and diversified water supply in this arid locale.
The system's service area comprises the City of El Paso plus several outlying residential areas which are serviced via wholesale water customers of the system. As the fifth largest city in the state of Texas, the city of El Paso has grown by 9.4% since 1990 to over 563,000 according to the 2000 census. El Paso County El Paso County may refer to one of the following counties in the United States:
The area's economy is based on international trade and manufacturing, copper mining, and ore smelting. Stability is also provided by the large military presence (Fort Bliss and Biggs Army Base) and educational concerns (the University of Texas at El Paso The University of Texas at El Paso, popularly known as UTEP, is a public, coeducational university, and it is a member of the University of Texas System. The school is located on the northern bank of the Rio Grande, in El Paso, Texas, and is the largest university in the ). Fort Bliss is expected to fare well in the upcoming round of base realignment and closures. Already, the realignment re·a·lign
tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns
1. To put back into proper order or alignment.
2. To make new groupings of or working arrangements between. of military bases in Europe has resulted in the announced reassignment of 3,800 troops to Fort Bliss, scheduled to begin this spring.
The system's water customer base has grown annually by a moderate 2.3% since fiscal 1999, totaling over 163,000 in fiscal 2004. In terms of water revenues, the customer base is diverse, with the top 10 users accounting for less than 11% of total water charges. To stabilize the freshwater levels in the Hueco Bolson, the system adopted a strategy to increase surface water use, encourage water conservation through rates and rebates, and increase reclaimed-water reuse. As a result, Hueco Bolson pumping declined annually starting in 1990, and the system's dependence on this water source declined from 60% of total water in 1989 to only 33% in 2002 despite the addition of about 140,000 residents during this period. Ample freshwater from this aquifer is projected to be available for 100 years or more based on reasonable assumptions of customer growth, water consumption, and drought events.
The system's 10-year capital improvement plan (CIP (1) (Common Isochronous Packet) The packet format used in time-based (real time) FireWire transmission. See FireWire, IEC 61883 and mLAN.
(2) (Common Industrial P ) is large at $1.1 billion, with system expansion as the largest component at $519 million (47% of total CIP). The federal government's mandate to lower naturally occurring arsenic levels led to a recent large bond issue, totaling $65 million in fiscal 2004. Another large CIP project, financed with the last month's offering, is the joint desalination desalination
Removal of dissolved salts from seawater and from the salty waters of inland seas, highly mineralized groundwaters, and municipal wastewaters. project located at Fort Bliss. The $84 million plant is designed to produce 27.5 million gallons per day of potable potable /pot·a·ble/ (po´tah-b'l) fit to drink.
Fit to drink; drinkable.
fit to drink. water from brackish brack·ish
1. Having a somewhat salty taste, especially from containing a mixture of seawater and fresh water: "You could cut the brackish winds with a knife/Here in Nantucket" water wells on Fort Bliss and the city's airport well field.
Fiscal 2005's large 35% rate increase in the average water and wastewater residential bill will allow considerable pay-as-you-go capital outlays, totaling $25-$35 million per year.
The system has typically maintained strong debt service coverage of 2.0 times (x) or more, although recent large projects led to the planned reduction of coverage in fiscal 2003 and 2004. The system's adoption of a 35% rate increase in the fiscal 2005 budget will allow coverage to return to management's target of 2.0x, well in excess of its rate covenant Rate covenant
A provision governing a municipal revenue project financed by a revenue bond issue, which establishes the rates to be charged users of the new facility.
rate covenant of 1.5x.
Although liquidity levels (63 days in fiscal 2004) are somewhat below average for this rating category, credit concerns are mitigated by the system's closed-loop flow of funds Flow of funds
In the context of municipal bonds, refers to the statement displaying the priorities by which municipal revenue will be applied to the debt.
In the context of mutual funds, refers to the movement of money into or out of a mutual funds or between or among , limiting general fund transfers to 10% of water sale charges, and restricting revenues for capital improvements. As a result, pay-as-you-go capital outlays averaged a substantial $23 million per year since fiscal 2000, peaking at almost $32 million in fiscal 2004.