Press Release|Public Finance
KBRA Assigns AA Rating to The Metropolitan Government of Nashville and Davidson County (TN) Water and Sewer Revenue Refunding and Improvement Bonds, Series 2025; Affirms WIFIA Loan Rating at AA
19 May 2025 | New York
KBRA assigns a long-term rating of AA to the Metropolitan Government of Nashville and Davidson County's (TN; the "Metropolitan Government") Water and Sewer Revenue Refunding and Improvement Bonds, Series 2025. Additionally, KBRA affirms the long-term rating of AA for the Metropolitan Government's Water and Sewer System WIFIA Loan for Process Advancements at Omohundro and K.R. Harrington Water Treatment Plant Projects (WIFIA ID - N20115TN). The rating outlook is Stable.
Key Credit Considerations
The rating was assigned/affirmed because of the following key considerations:
Credit Positives
- Providing essential services with rate setting autonomy. Demonstrated willingness to increase rates on an annual basis since fiscal 2020, to meet operating and capital requirements.
- Strong financial performance supported by fiscally sound financial and rate plans, with ample cash flow, liquidity, and debt service coverage. Rates remain competitive, maintaining rate flexibility going forward.
- Strong service area demographics, encompassing the rapidly growing City of Nashville, with above average income and employment levels.
Credit Challenges
- Managing the substantial capital plan and the potential for unanticipated capex cost increases through 2029.
- Significant debt requirements to fund the capex ($1.3 billion) may pressure leverage higher over the five-year horizon.
Rating Sensitivities
For Upgrade
- Substantial fulfillment of Consent Decree and ongoing capex requirements accompanied by the maintenance of moderate or reduced leverage and affordable rates.
For Downgrade
- Material escalation of the Consent Decree and other capital program costs to a level placing significant pressure on rate affordability and/or leverage.
- Inability to adjust rates as needed and on a timely basis to manage the systems’ operating and capital needs while maintaining moderate leverage.
To access ratings and relevant documents, click here.