2008-05-09 22:46:08 -
- Fitch assigns an 'AA' rating to the City of Lewisville, Texas' $10.5 million waterworks and sewer system revenue bonds, series 2008. In addition, Fitch assigns its 'AA' rating on approximately $37.1 million outstanding parity water revenue bonds. The Rating Outlook is Stable.
Proceeds from the bonds will be used to finance system improvements and to pay issuance costs.
Scheduled to price on May 19, 2008, the bonds will be sold via negotiation.
The 'AA' rating reflects the City of Lewisville's waterworks and sewer system substantial liquidity and adequate debt service coverage, a manageable capital improvement plan (CIP), competitive water rates, and stable service area with healthy economic underpinnings. The rating also reflects management's conservative financial policies, which offset the somewhat below average covenants, including rapid amortization, annual rate review and adjustments, and priority to make use of surplus utility funds for capital outlays. Maintenance of its favorable financial performance combined with a baseline senior lien coverage trend exceeding 2.0 times (x) would provide additional strength to the credit.
Debt service coverage has ranged from 1.4x to 2.0x, on an all-in basis, in the last five fiscal years. Financial projections through fiscal 2012 indicate continuance of this trend, averaging about 1.6x all-in and 1.8x senior lien coverage. For fiscal 2007, debt service coverage was strong at 1.7x all-in and 1.9x for the senior lien despite reduced sales due to weather fluctuation. Liquidity is substantial with over two years' cash-on-hand available for operations at Sept. 30, 2007. Given the city's policy of reviewing the adequacy of rates and adopting necessary rate increases, liquidity is projected to remain solid despite the use of available reserves for capital improvement projects.
Totaling $52.5 million, the system's five-year CIP is manageable. Approximately 77% is expected to be debt financed with the balance of projects completed with available system resources. Water system improvements total $40.5 million of the CIP with the largest projects including a pump station, new water supply lines, and line extensions and expansions. Sewer system projects total $12 million for a wastewater treatment plant, an elevated storage tank and various extensions, replacements, and rehabilitation of sewer lines. The city anticipates returning to the market in fiscal 2010 with about $12 million of parity system revenue bonds. Debt amortization is rapid with about 80% of the revenue bonds maturing within ten years. The city's policy with regard to debt repayment is to amortize over a maximum of 16 years.
The city provides water and wastewater services to approximately 93,000 residents of the City of Lewisville which is located about 20 miles northwest of Dallas. About 88% developed, Lewisville is currently experiencing in-fill growth and is estimated to reach a population of 111,000 upon build-out, currently projected by 2030. Lewisville's wealth indicators as measured by median household income and per capita income compare favorably to the MSA, state, and national levels. The unemployment rate of 3.4% in March 2007 is also better than the unemployment rates reported for the MSA, state and nation.
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
Gabriela Quiroga, 512-215-3731 (Austin)
Andy Kaaz, 512-215-3730 (Austin)
Cindy Stoller, 212-908-0526 (Media Relations, New York)
