Fitch Affirms City Utilities of Springfield, MO's $28.4MM Revs at 'AA'

Business Wire, Jan 10, 2008

NEW YORK -- Fitch Ratings has affirmed the City Utilities of Springfield, Missouri's (CU) $28.4 million waterworks refunding revenue bonds, series 2003 at 'AA'. The Rating Outlook is Stable.

Support for CU's rating level includes well-run treatment facilities with ample raw water supply, treatment capacity projected to meet growth through 2018, compliance with environmental regulations, and favorable service territory demographics with a diverse customer base. In addition to a strong management team and city council that support CU's strong financial profile, CU has a manageable capital expenditure program and water rates that are competitive within the region. Historically water rates increased by 3% in December 2005 and 5% in October 2007. CU's projections include approved 3% increases in October 2008 and October 2009. CU's wealth indicators are below the county and state average, but are offset by the lower cost of living.

Fitch anticipates that CU will continue to maintain stable financial trends with future debt financing provided via CU's lease agreement (approximately $25.1 million). Current capital projects included a raw water main and increased storage capacity. Debt service coverage has improved slightly from 2.05 times (x) to a robust coverage of 2.50x. Financial Performance is expected to remain stable going forward. Days of cash on hand declined from 78 days in 2003 but remained level at around 67 days in 2005 and 2006. CU was able to absorb the impacts of a drought in 2006, drawing down on reserve supplies and has since replenished sources to just below pre-drought levels. Additionally, there has been no material change in CU's tax-base or economy. While CU expects the housing market to slow, due to some sub-prime exposure, it does not anticipate this to have an impact on revenues.

CU is a combined municipal utility, comprised of two separate financial enterprises: the Waterworks System and the Public Utility (which includes the electric, natural gas, telecommunications and transportation departments). The Waterworks System serves approximately 79,613 customers comprised of 70,841 residential and 7,772 commercial and industrial customers. Water revenues by customer class are diverse at 60% residential and 40% commercial and industrial. The water system draws water from Stockton Lake, Fellows Lake, McDaniel Lake, James River, Fulbright Spring and five deep wells.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.