KBRA Affirms AA Rating for San Mateo-Foster City Public Financing Authority, City of San Mateo, CA - Sewer Enterprise 2020 WIFIA Loan
8 Sep 2023 | New York
KBRA affirms the long-term rating of AA for the San Mateo-Foster City Public Financing Authority, City of San Mateo (the City) Sewer Enterprise 2020 EPA WIFIA Loan (San Mateo Wastewater Treatment Plant Upgrade and Expansion Project). The Outlook is Stable.
KBRA’s rating affirmation reflects the San Mateo Sewer Enterprise's wealthy and mainly residential service area, excellent liquidity position, and consistent sewer rate increases by the City of San Mateo that support the Sewer Enterprise’s strong coverage of debt service. Partially offsetting these strengths are the large size and cost of the ongoing ten-year capital improvement plan.
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- Excellent cash flow and liquidity with more than 1500 days cash on hand for FYE 2022.
- Implementation of timely and considerable sewer rate increases over the past 10 years, supporting the City’s substantial long-term capital plan.
- Wealthy service area with a primarily residential customer base.
Credit Challenges
- The final phase of the WWTP is moderately behind schedule, but the added project cost to date remains within the original cost estimate. Further material cost over-runs could represent a financial burden.
- While the City is taking advantage of low-cost state and federal loans for its capital plan, leverage has increased through FY2022, albeit acceptable for the rating level.
Rating Sensitivities
For Upgrade
- Favorable progress in WWTP project performance with a stronger than projected DSC.
- Sustained reduction in the Sewer Enterprise’s leverage.
For Downgrade
- WWTP cost over-runs that present a significant financial burden.
- A reduction in Sewer Enterprise revenues causing a sustained decline in DSC or liquidity.
To access rating and relevant documents, click here.