The rating reflects what we view as the system's stable area economy, which is anchored by the Colorado State University; ample long-term water supply and treatment capacity; low customer rates relative to other water districts in Colorado; very strong liquidity, with nearly three years of cash and investments on hand at the end of fiscal 2008; and very strong debt service coverage provided by audited fiscal 2008 revenues including tap fees of more than six times maximum annual debt service coverage following this issuance.
The rating strengths are offset, in our opinion, by a reduction in tap fees that have declined by 74% since fiscal 2007 due to less development and growth. However, excluding all tap fees from available fiscal 2008 pledged revenues, debt service coverage remains a still strong 3.2x.
Net revenues from the water system secure the bonds. Bond proceeds of roughly $12 million will be used to purchase raw water rights and water storage facilities.
"We expect that the district will maintain at least $10 million in cash reserves per its informal board policy," said Standard & Poor's credit analyst Timothy Barrett. "We also expect that debt service coverage will remain strong given the lack of additional capital needs over the next five years."
Fort Collins-Loveland Water District is located in Larimer County about 60 miles north of Denver and serves roughly 42,000 people in southern portions of Fort Collins, the towns of Timnath and western Windsor, and areas between Fort Collins and Loveland.
RELATED RESEARCH
USPF Criteria: "Standard & Poor's Revises Criteria For Rating Water, Sewer, And Drainage Utility Revenue Bonds," Sept. 15, 2008
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Media Contact:
Ana Sandoval, New York (1) 212-438-5095, [email protected]
Analyst Contacts:
Timothy Barrett, New York (1) 212-438-6327
Misty Newland, San Francisco (1) 415-371-5073