KBRA Affirms A+ Rating with Stable Outlook to the Sewerage and Water Board of New Orleans WIFIA Loan for Sewer and Water Line Rehabilitation, Repair and Replacement Program
24 Oct 2023 | New York
KBRA affirms the long-term rating of A+ for the Sewerage and Water Board of New Orleans (SWBNO) WIFIA Loan for Sewer and Water Line Rehabilitations, Repair, and Replacement Program. The Outlook is Stable.
The rating affirmation reflects the SWBNO’s independent sewer rate-setting authority, solid financial performance, experienced management team, and strong legal provisions supporting the sewer system debt. Offsetting these strengths is the substantial sewer capital investments needed to meet mandated environmental and aged-infrastructure improvements, and the limitations on rate flexibility suggested by the service area’s below average income level and above average poverty rate.
A surveillance report will follow.
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- Providing an essential utility service with local rate-setting authority.
- Sewer system’s historically solid financial performance.
- Solid management team with experience leading an urban utility system through extreme weather events and implementing a multifaceted capital plan.
- Strong legal provisions for the WIFIA Loan, including a rate covenant of 1.25x and fully funded DSRF.
Credit Challenges
- Major capital plan to fund mandated and needed sewer infrastructure updates.
- Reduced rate flexibility suggested by the service area’s somewhat weaker demographic profile.
Rating Sensitivities
For Upgrade
- Successful implementation of capital projects on-time and on-budget, supported by timely rate increases, resulting in stronger than projected DSC.
For Downgrade
- Service area affordability challenges that compromise the Board’s ability to raise rates.
- Material delay and/or inadequate replacement of needed improvements to the City’s aging sewer system under the CIP, increasing future capex and jeopardizing the system’s reliability.
To access rating and relevant documents, click here.