Moody’s Ratings has upgraded the City of Fort Wayne, Indiana’s outstanding water revenue bonds to Aa2 from Aa3 and upgraded the city’s outstanding sewer revenue bonds to Aa3 from A1.
Moody’s Ratings Boost Underscores City Utilities’ Financial Strength, Catalytic Role in Economic Development
Fort Wayne, Indiana (December 5, 2024) — Yesterday, City Utilities received a stamp of approval from the financial management firm Moody’s Ratings. The global company, providing credit ratings and risk analysis for corporations and governments, assigned a stable outlook to all three parts of City Utilities: Water, Sewer and Stormwater.
“This significant achievement reflects City Utilities’ role in economic and community development. By strategically deploying our regional services, we are meeting the demands of Fort Wayne and Northeast Indiana’s tremendous growth. Of equal importance, the Moody’s rating upgrade demonstrates the Utilities’ strong financial management and commitment to completing vital infrastructure projects for the community,” said Kumar Menon Director of City Utilities. “Whether it’s a major employer with a new build or expansion, a housing project, a school or a hospital, we’re there from planning to completion, providing the services needed for the community to grow. The findings by Moody’s highlight our financial dedication to infrastructure development and the bright future we’re helping to create.”
The analysis pointed to a stable outlook based on a growing Fort Wayne economy and a strengthening financial position.
Moody’s announcement includes:
- Upgrading City Utilities sewer bonds from A1 to Aa3
- Upgrading City Utilities water bonds from Aa2 to Aa3
- Affirming City Utilities stormwater bonds at Aa2
“The upgrades are a testament to the team’s focus on operational excellence and community service,” said Justin Brugger, City Utilities Chief Financial Officer. “They are a direct result of our disciplined approach to managing finances and ensuring that we deliver critical projects on time and within budget. These projects not only enhance our water and sewer systems, but also contribute to our community’s overall health and well-being.”
Improved bond ratings allow the Utility to secure lower interest rates and leverage our resources more effectively. The ratings’ upgrades translate into expanded funding for more neighborhood projects, such as replacing aging water pipes and improving stormwater drainage.
Text of the news release from Moody’s:
Rating Action
Moody’s Ratings upgrades Fort Wayne, IN’s water revenue to Aa2; sewer revenue to Aa3
New York, New York (December 4, 2024) – Moody’s Ratings (Moody’s) has upgraded the City of Fort Wayne, IN’s outstanding water revenue bonds to Aa2 from Aa3 and upgraded the city’s outstanding sewer revenue bonds to Aa3 from A1. We have also affirmed the Aa2 rating on outstanding stormwater revenue bonds and assigned a stable outlook to Fort Wayne (City of) IN’s Stormwater Enterprise, Sewer Enterprise and Water Enterprise.
The upgrade of the water revenue debt is driven by improved debt service coverage over the past several years. The upgrade of the sewer revenue debt is driven by decline in the debt burden as the system nears completion of mandated combined sewer overflow projects.
RATINGS RATIONALE
The Aa2 stormwater rating reflects the stormwater system’s very healthy debt service coverage of 4.4x in 2023, ample liquidity of over 1,500 days, and a modest debt burden of 1.1x revenue. The system is relatively small with operating expenses of about $5 million, but it benefits from a large service area and ownership by the City of Fort Wayne, which has much larger operations with strong liquidity. Legal provisions are adequate and include a rate covenant of 1.25x, ABT of 1.2x and a debt service reserve fund which is funded using the standard three prong test.
The Aa2 water rating reflects the water system’s healthy debt service coverage of 2.2x in 2023, strong liquidity of 292 days cash on hand, and a relatively low debt burden of 2.4x revenue. Legal provisions are adequate and include a rate covenant of 1.0x and a debt service reserve fund which is funded at MADS. Rate increases are subject to approval by the IURC.
The Aa3 sewer rating reflects the system’s solid debt service coverage of 1.5x in 2023, strong liquidity of 344 days cash on hand, and a high debt burden of 5.7x revenue. We expect the debt burden will steadily decline as the system is nearing completion on mandated projects to address combined sewer overflows (CSOs). Legal provisions are adequate and include a rate covenant of 1.1x and a debt service reserve fund which is funded using the standard three prong test.
RATING OUTLOOK
The stable outlook reflects the city’s growing economy and strengthening financial position. Growth in key revenue sources will continue to support the city’s financial stability and allow strategic investments to services and capital.
Releasing Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007 U.S.A© 2024 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved
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