Fitch Rates Grand Prairie, Texas's $15.8MM Water & Sewer Revs 'AA'; Outlook Stable
Source: Business Wire
The 'AA' rating reflects the city's sound policies, which have provided solid financial performance and healthy liquidity levels. Capital costs are manageable, and coverage levels are expected to remain strong. Rates will increase moderately over the near term but should remain competitive. Service area economics remain positive, with the city benefiting from its central location in the Dallas-Fort Worth region.
The water system serves over 60,300 customers, and approximately 88% of all treated water is supplied by the Dallas Water Utilities under a contract extending through 2012. Roughly 6% of the city's water supply is provided through a contract with Fort Worth that expires in 2010, and the balance is derived from city wells. The wastewater system serves over 60,100 customers, with treatment provided by the Trinity River Authority under a contract that extends to 2023.
Coverage levels remain well above average, reflecting the city's lack of direct debt related to treatment facilities and source water supply. For fiscal 2007, unaudited annual debt service (ADS) coverage was 2.1 times (x), consistent with historical results. ADS coverage is projected at about 1.9x-3.3x through fiscal 2011, although the city employs conservative modeling assumptions and actual performance has tended to be more favorable. Liquidity remains strong and in line with the 'AA' category. Fiscal audited 2006 liquidity was sizable at over 400 days of unrestricted cash and investments.
The city's fiscal years 2008-2012 capital improvement program (CIP) totals almost $70 million, up considerably from a few years ago as a result of elevated projected population density in the southern sector of the city and higher material costs. Despite the rising capital costs, the debt burden to customers is, and is expected to remain, relatively low compared to other utilities. Funding for the CIP will come predominantly from this and future debt issuance, although the city plans to continue its practice of providing a substantial amount of pay-as-you-go funding. Utility rates are lower than the regional average level and should remain competitive even with planned moderate near-term hikes.
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Jose Acosta, 512-215-3726
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