Press Release|Public Finance
KBRA Affirms AA- Rating for Soquel Creek Water District, CA Pure Water Soquel Project WIFIA Loan; Stable Outlook
17 Aug 2023 | New York
KBRA affirms the long-term rating of AA- with a Stable Outlook for the Soquel Creek Water District Pure Water Soquel Project (PWS) WIFIA Loan.
The long-term rating for the WIFIA loan reflects the fundamental credit strengths of the Soquel Creek Water District (District) including a sound customer base and service territory, a history of stable financial performance, demonstrated willingness to raise water rates as needed, and a large but manageable capital improvement plan.
A surveillance report will follow shortly.
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- Favorable socioeconomic profile of the primarily residential service area territory;
- PWS project construction remains within budget, supported by grants and low-cost loans from the federal and state governments which help defray significant project costs;
- District has enacted rate increases of 9% annually through 2023 to maintain strong financial performance.
Credit Challenges
- Pure Water Project is a substantial capital undertaking for the District. While the PWS project has experienced manageable construction delays thus far, further cost overruns could financial burden the District; and,
- Water usage is on the decline given drought management measures in the State, which will pressure water rates going forward.
Rating Sensitivities
For Upgrade
- Project execution with limited delays and cost overruns, and stable operating performance post-completion.
For Downgrade
- Material project cost overruns which present a significant financial burden; and,
- While unlikely, a period of sustained water consumption significantly below budget without offsetting rate increases or expense reduction.
To access rating and relevant documents, click here.