ENCINITAS — Fitch Ratings reaffirmed in September that Olivenhain Municipal Water District’s bond rating of AA+ with a stable outlook, citing OMWD’s “excellent financial performance in the face of drought and recession as well as strong liquidity.”
Fitch reported that OMWD shared characteristics with AAA-rated agencies, such as debt service coverage and its debt-to-equity ratio. With respect to the latter, Fitch noted that OMWD’s ratio “is very close to the 1.6x median for AAA-rated utilities, while OMWD’s debt-to-net plant assets ratio is very low at 24 percent.”
To prevent reliance on increasingly expensive imported water, OMWD has invested in diversifying its water supply portfolio by expanding its recycled water system and studying the development of a brackish groundwater desalination facility.
Diversification efforts were praised by Fitch, as a source of more reliable water supplies for OMWD customers at more predictable prices. Though OMWD may issue bonds to finance important new water facilities, maintaining its exemplary bond rating will afford it lower interest rates when doing so. Favorable interest rates can help to alleviate the upward pressure on water rates resulting from increasing wholesale water costs.
“OMWD customers benefit directly from their water agency’s financial performance. This rating is a testament to the well-founded policies and principles guiding both our water supply and financial planning efforts.” Said Mark Muir, treasurer of OMWD’s board of directors.
Bond ratings are key indicators of the financial health and long-term sustainability of an agency. OMWD has seen a positive, upward trend with its bond ratings. Standard & Poor’s upgraded OMWD to a highly favorable AA+ rating in 2009, and Fitch followed suit in 2010. OMWD’s outlook is considered by both agencies to be stable.
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