Gig Harbor, WA Water, Sewer Revenue Bond Rating Raised To #AA# On Application Of Revised Criteria

Stocks and Financial Services Press Releases Wednesday March 8, 2017 09:23
SAN FRANCISCO--8 Mar--S&P Global Ratings

SAN FRANCISCO (S&P Global Ratings) March 7, 2017--S&P Global Ratings raised its long-term rating on Gig Harbor, Wash.'s water and sewer revenue bonds to 'AA' from 'AA-'. At the same time, we assigned our 'AA' long-term rating to the city's series 2017 water and sewer revenue bonds. The outlook is stable. "We raised the rating based on the application of our revised criteria "Rating Methodology And Assumptions For U.S. Municipal Waterworks And Sanitary Sewer Utility Revenue Bonds" (published Jan. 19, 2016, on RatingsDirect)," said S&P Global Ratings credit analyst Alexandra Rozgonyi. We view the water and sewer system as having very strong enterprise and financial risk profiles. The city is issuing the series 2017 bonds to construct and install certain additions and betterments to improve its water and sewer system.

We consider the bond provisions to be credit neutral. The bonds are secured by the net revenues of the city's water and sewer system. The series 2010A and 2010B bonds are Build America Bonds (BABs) and the city elected to receive a direct federal subsidy equal to 35% of interest on the BABs. Our assessment of the system's enterprise risk profile as very strong reflects our view of the system's strong economic characteristics, affordable service rates, and sufficient water supply and wastewater treatment capacity to meet future demand. Gig Harbor is in northwestern Pierce County, near the southern tip of Puget Sound, is 11 miles west of Tacoma and 43 miles outside Seattle.

The system's customer base is primarily residential and has grown rapidly at about 6% annually during the past five years. The system currently serves approximately 2,400 water and 2,700 sewer customers. "The stable outlook reflects our anticipation that the system's financial performance will remain very strong and that the broad and diverse metropolitan area economy will provide additional stability during the next two years," added Ms. Rozgonyi. We could take a positive rating action if the system can maintain very strong all-in coverage metrics while reducing its reliance on one-time general facilities charge revenues, and can also diversify its customer base.

Conversely, we could take a negative rating action if the system's financial performance deteriorates significantly or cash reserves are materially spent down. Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com and at www.spcapitaliq.com. All ratings affected by this rating action can be found on the S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.


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