KBRA Affirms AAA Rating for the City of San José Financing Authority's (CA) Wastewater Revenue Bonds, Stable Outlook
8 Nov 2024 | New York
KBRA affirms the long-term rating of AAA for the City of San José Financing Authority's (CA) Series 2022B Wastewater Revenue Bonds. The Outlook is Stable.
The rating reflects the affluent service area economy, competitive sewer rates, ample wastewater treatment capacity, and strong financial performance characterized by robust debt service coverage and liquidity. The rating is further supported by the inclusion of the vast majority of the City of San Jose’s sewer charges on Santa Clara County’s (the "County") secured property tax roll, with timely collections backstopped by participation in the County’s Teeter Plan.
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- Affluent, highly educated service area, with a strong employment base and low poverty rates in the heart of Silicon Valley.
- Robust financial performance as evidenced by strong debt service coverage, liquidity, and modest debt levels.
- Autonomous rate-setting authority, competitive wastewater rates and favorable collections given the inclusion of sewer charges on the County’s property tax bills and supported by the Teeter Plan.
Credit Challenges
- Continue to effectively manage the large wastewater capital plan and costs through fiscal 2029, with a manageable debt burden.
Rating Sensitivities
For Upgrade
- Not applicable at this rating level.
For Downgrade
- Failure to adequately raise sewer rates and/or maintain debt service coverage, liquidity and leverage metrics commensurate with the rating.
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