This press release was issued by Fitch Ratings, Inc.
Fitch Rates Atlantic County Utilities Auth (NJ) 2009 Sewer Revs 'A'; Outlook Stable
19 Aug 2009 3:02 PM (EDT)
Fitch Ratings-New York-19 August 2009: Fitch Ratings has assigned an 'A' rating to the $18.475 million sewer revenue refunding bonds, 2009 series (the bonds) of the Atlantic County Utilities Authority, New Jersey (the authority). The new issue is scheduled to sell the week of Aug. 24, 2009 via negotiated sale. The Rating Outlook is Stable. At the same time, Fitch withdraws the rating previously assigned to the bonds on Feb. 12, 2009 because the bonds were never sold.
The bonds are secured by a pledge of gross revenues of the authority's system which includes annual charges payable by the member participants in an amount sufficient to pay operating expenses and debt service. In addition, the authority's municipal and local authority participants have the power to levy ad valorem taxes for the payment of annual charges. Proceeds will be used to refinance certain outstanding 1998 sewer revenue bonds of the authority.
The 'A' rating reflects the authority's successful operating history, the essential nature of wastewater treatment services provided by the authority, and strong legal protections. The rating also reflects the strength of the authority's four largest members (the Atlantic City Sewerage Company, the Egg Harbor Township Municipal Utilities Authority, the city of Brigantine and the township of Galloway) which account for approximately 60% of total annual charges and which must cover any additional annual charges in the event any member fails to pay.
Offsetting considerations include the heavy concentration in the tourism and casino industry of Atlantic City, which represents a significant portion of the service area and is experiencing financial pressures with the current economic downturn.
The authority is a wholesale provider of sewerage conveyance and treatment services and was created in 1969 to manage wastewater treatment for its 14 member participants in Atlantic County. The members are Absecon, Brigantine, Egg Harbor City, Linwood, Longport, Margate, Northfield, Pleasantville, Somers Point City and Ventnor, and two local municipal authorities: Egg Harbor Township MUA and Hamilton MUA (both of these have individual service contracts with their respective underlying municipality), and an investor-owned utility, the Atlantic City Sewerage Company, servicing the city of Atlantic City. The authority's wastewater system consists of a wastewater treatment plant on City Island (300 acres) and provides both primary and secondary treatment with capacity of 40 million gallons daily (MGD), a wastewater collection system of approximately 60 miles of interceptors and force mains, 20 pumping stations and an ocean outfall line in to the Atlantic Ocean through a diffuser system. The system has been consistently upgraded and is not expected to reach full capacity until at least 10 years out. Current daily flow is 29 MGD, and the authority plans to use conservation to extend the time prior to reaching full capacity and undertake other projects to provide additional treatment capacity.
The authority's financial position is strong. Financial results continue to improve and have ensured strong operating margins and a good level of liquidity. In addition, operations of the authority continue to benefit from a long history of prudent financial management and sound reserve policies. The authority's net revenues covered debt service by a solid 1.22 times in fiscal 2008, and liquidity was equal to 658 days of cash on hand. Annual rate increases have ranged between 2%-4% annually. For 2008, the authority increased rates 2.5%, and no increase was proposed in 2009. The authority's multi-year capital plan is manageable at approximately $38.2 million, with new debt issuances subsidized through the state's environmental infrastructure trust fund.
The authority did not participate in the state's pension deferral in 2009 and prudently funded $364,000 in 2009 in pension costs. The authority reports that its total other post employment benefits (OPEB) liability is $20 million with $12 million for the wastewater division. The authority has set aside $2 million to fund the liability and will continue its policy of pay-go of approximately $400,000 in annual contributions.
Contact: Ann G. Flynn +1-212-908-9152 or Christopher Hessenthaler +1-212-908-0773, New York.
Media Relations: Cindy Stoller, New York, Tel: +1 212 908 0526, Email: email@example.com.