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.


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