Fitch Ratings upgrades to 'AAA' Orem, UT obligations.
Austin: Fitch Ratings, a nationally recognized statistical rating organization (NRSRO) designated by the U.S. Securities and Exchange Commission, upgraded to 'AAA' from 'AA+' the following Orem, UT (the city) obligations: --Approximately $5.1 million water and storm sewer revenue refunding bonds, series 2016.
The bonds are secured by net water and storm sewer system (the system) revenues after payment of maintenance and operations expenses. Rate increases in recent years have increased operating revenue, improving free cash flow (FCF) that is expected to support increased capital spending and generate debt service coverage over 6.0x.
Debt metrics are stronger than similarly rated systems and amortization is rapid. The debt burden will continue declining as the city has no plans to issue additional water and storm sewer bonds over the next five years. The combined water and storm sewer capital improvement plan (CIP) totals about $47 million, up from the 2017 CIP totaling $25 million. The increase is attributable to the addition and reprioritization of projects identified in system master plans, but remains manageable in scope.
The water system benefits from an ample, secure supply of water that requires limited treatment and allows the system to offer affordable rates and to sell surplus water to a neighboring town. The city's water and storm sewer systems are monopoly providers of essential services to a suburban service area with healthy economic performance.