Fitch rates Arvada, Colo. water enterprise bonds 'AA/F1+'
Fitch announced it has assigned its expected 'AA/F1+' rating to Arvada, Colo.'s $36,130,000 variable rate demand water enterprise revenue bonds, series 2001.
NEW YORK, NY, Jan. 3, 2001 (BUSINESS WIRE)—Fitch announced it has assigned its expected 'AA/F1+' rating to Arvada, Colo.'s $36,130,000 variable rate demand water enterprise revenue bonds, series 2001.
The bonds are expected to sell competitively on or about Jan. 11, 2001. The 'AA' reflects the underlying rating. The City of Arvada, Colorado, variable rate demand water enterprise revenue bonds, series 2001, are expected to be rated 'AAA/F1+'.
The long-term 'AAA' rating will be based on a bond insurance policy which is expected to be issued by Financial Security Assurance Inc. concurrently with the issuance of the bonds. The short-term 'F1+' rating will be based on a standby bond purchase agreement to be provided by Dexia Public Finance Bank. A rating on the variable rate transaction will be provided closer to pricing.
Located 20 miles northwest of downtown Denver, Arvada continues to experience steady growth and development, primarily residential. The system serves approximately 31,000 residential, commercial/industrial and wholesale customers within the city of Arvada and surrounding area. The service area is healthy with well above average employment and wealth indicators.
Credit strengths include strong financial operations, as characterized by consistently positive operating margins, substantial cash balances, prudent fiscal policies, and good debt service coverage. Other strengths include the strong service area and customer base. Financial flexibility is especially strong with 1999 financial results indicating approximately $36 million in retained earnings, which is substantial relative to the operating budget. Users are primarily residential with the top 10 customers totaling a low 5.8% of revenue. Additionally, rates are below comparable entities and projected to remain competitive.
Offsetting credit factors include a moderate dependence on growth sensitive connection fees. Population growth has been extreme over the past decade and correspondingly has generated above average connection fee revenue. A very conservative stress model discounting all future connection fee revenue, however, indicates debt service coverage of an adequate 1.9 times (x) by fiscal 2000 revenue. Nevertheless, financial flexibility may be hindered if growth shows a dramatic slow down.