Standard & Poor’s Rating Services has upgraded the city of Escondido’s bond ratings that are connected with its water system.
S&P raised its long-term rating to ‘AA-’ from ‘A+’ on the Escondido Joint Powers
Financing Authority, California’s existing series 2012 revenue bonds (water system financing), issued on behalf of the city of Escondido. At the same time, it raised its rating to ‘AA-’ from ‘A+’ on the city’s series 2007 water system certificates of participation (COPs).
City taxpayers will benefit from the improved ratings, which are used to set the interest rates for the city’s water system bonds.
Mayor Sam Abed told the Times Advocate: “The recent two water bonds upgrade reflect the city’s strong financial stability based on sound financial policy that we have implemented the last few years, It will save the rate payers tens of millions of dollars in interest rate in future borrowings. This is a win for taxpayers.
According to S&P’s “rationale” for its ratings: “The outlook is stable. The raised rating is based on the city’s consistently strong historical financial performance, which we believe will be sustainable at least for the next two years.”
S&P noted that the city is “Stable, primarily residential, and very diverse customer base that participates in the broad and diverse San Diego metropolitan area economy.”
On the other hand, said S&P, “Partly offsetting these credit strengths, in our view, are the water system’s heavy reliance on water supplied by San Diego County Water Authority (SDCWA) (AA+/Stable), which exposes the city to wholesale water supply increases, as well as uncertainty due to the statewide drought and the impact of the mandatory state-wide conservation on near-term system finances.”
Over the next two decades the city is expected to borrow as much as $300 million to build a water recycling system, with $80 million in bonds due to be issued in the next five years.
The new ratings will apply to two very large water projects that the city will be undertaking in the next few years, including the Lake Wohlford Dam rebuild and the removal and replacement of part of the Escondido Canal.