So you hear or read elsewhere that other cities don't have debt or as much debt as San Juan Capistrano. Well, maybe. But keep some perspective: Dana Point and Laguna Niguel also don't have water agencies. Laguna Niguel (and other areas) have Moulton-Niguel Water District.
That is a big district and it does have debt. Maybe less, maybe it's OK, but don't believe everything you read ...
Here's from Fitch:
Fitch Rates Moulton Niguel Water District, California's GO Bonds 'AA+'; Outlook Stable
SAN FRANCISCO--(BUSINESS WIRE)--As part of its continuous surveillance effort, Fitch Ratings takes the following rating actions on Moulton Niguel Water District, CA's (MNWD):
--$41.74 million consolidated refunding general obligation (GO) bonds series 2003 affirmed at 'AA+'.
The Rating Outlook is Stable.
RATING RATIONALE:
--The GO rating is based on a weak link analysis of the ability of each of three of the MNWD's six improvement districts to levy unlimited ad valorem taxes to repay their respective share of debt service;
--It further reflects the provision of essential services to the three affluent, largely built out improvement districts;
--Each of the districts has experienced tax base declines, though tax rates are adjusted annually by the county based on each district's debt service needs and assessed valuation;
--Concentration is not a concern as the areas are primarily residential;
--All three districts have low direct debt levels, rapid amortization, and no additional capital needs except for district-wide projects;
--MNWD's overall financial performance has been very strong with solid debt service coverage levels and well above-average liquidity despite reliance on costly imported water supplies for 100% of its potable water needs;
--The district enjoys low rates, as property taxes contribute a significant portion of revenues.
KEY RATING DRIVER:
--Maintenance of sound financial results despite rising fixed and operating costs and a recently declining tax base will be important to maintaining the rating level;
SECURITY:
The bonds are payable solely from unlimited ad valorem assessments on all taxable land within improvement district Nos. 6, 7, and 8. Each obligation is several and not joint, thus amounts collected in any improvement district will not be available to pay any other improvement district's share of debt service payments. Proceeds from land delinquency sales and certain moneys and earnings from the bonds' funds and accounts are also pledged to debt service.
CREDIT SUMMARY:
MNWD provides water, wastewater and recycled water services to approximately 167,000 residents in southern Orange County. Encompassing 36.5 square miles, the district includes the cities of Aliso Viejo, Laguna Niguel, significant portions of Laguna Hills and Mission Viejo and small portions of Dana Point and San Juan Capistrano. County wealth levels in the area are very high with median household income approximately 123% of the state and 144% of the national average. District-wide assessed value (AV) levels (land only) have declined by a combined 7.7% over the past two years. The district does not participate in the Teeter plan, thus tax revenues are based on actual collections which can be over 100% because of a 5% delinquency factor included in the tax rate assumptions less any excess funds available from the prior year.
Fitch rates the MNWD's water revenue certificated of participation 'AAA' outlook stable as payments are secured first by property tax revenues, and secondly from net revenues of the entire district's water, recycled water and sewer systems. The GO bonds are secured by tax assessments within three of MNWD's six improvement districts whose obligations are several and not joint and are thus based on a weak link analysis of the three districts. MNWD includes six operating improvement districts (Nos. 1, 2, 3, 6, 7, and 8) and allocates costs of development and maintenance of the water and sewer systems to each district.
The three districts securing the bond payments (Nos. 6, 7, 8) are all built out with basically unchanged populations over the past ten years. The bonds are allocated to each district based on their respective share of improvements, with district 6 responsible for 71% of remaining principal, district 7 responsible for 28%, and district 8 responsible for 0.5%. While delinquency rates for the three districts are low, they have risen in the last year. Tax rates are adjusted for each improvement district by the County on an annual basis to account for any changes in AV, which mitigates concerns about tax base declines.
Comprising about 6,410 acres in the northern portion of MNWD, district No. 6 is the largest of the three with a population of 49,903. In fiscal 2010 it served about 28% of total MNWD connections with about 15,280 water connections and 14,032 sewer connections. It also has the largest AV of the three; however, AV declined a combined 11.4% in fiscal 2010 and 2011. As of 2003, the most recent information available to Fitch, the top 10 taxpayers accounted for about 11% of AV, which is slightly concentrated; however, their residential status somewhat mitigates any concern. While it has the highest tax rate of the three, it is still low at 0.10894 per $100 AV. Its current tax collections equaled 97.1% of the levy in fiscal 2010, down from 107.4% the prior year.
District No. 7 comprises 1,500 acres in the cities of Laguna Niguel and Dana Point in the southern part of the district closest to the ocean. It serves about 10,325 residents with 3,532 water connections and 3,283 sewer connections (about 6.5% of total MNWD connections). As of 2003, the ten largest taxpayers represented a low 5.1% of AV, most of which were single family residential. AV declined a combined 7% in fiscals 2009 and 2010, before increasing 0.1% in fiscal 2011. Its current tax collections equaled a high 102.3% of the levy in fiscal 2010, down from 105.6% the prior year.
District No. 8 comprises about 1,730 acres in the central part of the district parallel to the San Diego Freeway. It has a small population of 8,558 and serves about 5% of total MNWD connections with 2,608 water connections and 2,484 sewer connections. Its primary development is the Nellie Gail Ranch a 917-acre community of luxury homes on equestrian lots. As of fiscal 2003, the district was not concentrated with the ten largest taxpayers, most of which were single family residential, representing only 2.75% of AV. AV declined a combined 9.8% over the last three years. Its current tax collections equaled 96.6% of the levy in fiscal 2010, down from 105.7% the prior year.
Within each district, direct debt levels are very low and all principal is retired within 10 years. Debt as a percent of TAV is a very low 0.72% for district No. 6, 0.51% for district No. 7, and 0.01% for district No. 8 and is less than $1 per capita for each district. The remaining debt authorization for each district is as follows: $77.5 million for ID No. 6, $6.9 million for ID No. 7, and $7 million for ID No. 8. While MNWD anticipates some district-wide capital needs which would be funded with water system revenues, it does not expect to issue additional GO debt in the near term as the districts are built out. Amortization of the GO principal is rapid, maturing in fiscal 2013 for district No. 8, 2017 for district No. 6, and 2020 for district No.7. In addition, overall direct and overlapping MNWD debt is low at $2,415 per capita or 2.8% of AV in fiscal 2010.
MNWD's overall financial performance has been very strong with historic debt service coverage ranging from 2.0 times (x) to 4.7x from fiscal 2005 through 2010. Coverage levels are projected to dip to just below 2.0x in fiscal 2011 when the 2009 debt rolls on and maximum annual debt service is reached, but is expected to rebound quickly thereafter to above 2.0x from fiscals 2012 through 2015. Liquidity measures have been very strong with well over two years of cash since 2005. At the end of fiscal 2010, unrestricted cash and investments totaled nearly $12 million, equal to an impressive 896 days cash. With a manageable $135 million five-year capital plan requiring no additional debt and approved rate increases through fiscal 2012, liquidity is expected to remain above the district's comprehensive reserve policy that sets minimum targets for three general reserves and three capital reserves.
The district is a member agency of the Metropolitan Water District of Orange County (MWDOC) and receives 100% of its potable water supply from MWDOC. MWDOC in turn, imports water which it buys primarily from the Metropolitan Water District of Southern California (MWD; revenue and GO bonds rated 'AAA' by Fitch). MWD's significant water supply challenges and cost pressures on imported water are expected to continue and to impact the cost of operations of underlying retailers to some degree. Nevertheless, the district's rates are among the lowest in the area, benefiting from the property tax revenues generated and collected by the district; these revenues account for about one-third of total district revenues. Currently, the average monthly water bill using 1,600 cubic-feet of water is $28, significantly less than the water portion of bills for other entities which also are highly dependent on imported water from MWD; wastewater charges are also low. Even with approved annual rate increases of 16.2% over the next two years, projected rates are expected to remain very affordable.
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