Fitch Ratings has assigned an 'AA-' rating to the City of Salisbury’s $39.9 million combined enterprise system revenue bonds, series 2020. In addition, Fitch Ratings assessed the city’s water and sewer system’s (the system) Standalone Credit Profile (SCP) at ‘aa-‘. The rating outlook is stable.
A press release issued by Fitch Ratings, the analytical conclusions stated “the system's operating risk profile is supported by a very low operating cost burden with elevated life cycle investment needs. Revenue defensibility reflects largely affordable rates, offset by stable demographic characteristics. The system is highly concentrated yet most customers are stable municipal and public entities.”
Key factors cited that contributed to the City’s credit ratings include:
Revenue Defensibility: Affordable Rates; Concentrated Economy.
The revenue defensibility assessment reflects the system's independent legal ability to set rates which are affordable for most customers, with stable service area characteristics. Service territory concentration concerns are somewhat mitigated by stable, long-standing customers.
Operating Risks: Very Low Operating Cost Burden; Stable Capital Plan.
The system's operating risks assessment takes into consideration a very low operating cost burden, with elevated life cycle investment needs, likely reflecting the system's preference for maintenance over replacement. Capital spending to support renewal and replacement needs is considered weak.
Financial Profile: Very Strong Financial Profile.
Declining leverage observed the past four fiscal years rose in fiscal 2020 with debt issuance, but is expected to fall again in Fitch's scenario analysis. Leverage is expected to remain below 3x. The liquidity profile is considered neutral to the assessment.
“I am very proud of the work our city management and finance team has been doing to ensure that we receive the best possible rating, said Shannon Moore. “It further confirms the work the team has been doing to ensure the City’s financial stability aligns with critical investments even in the midst of today's difficult financial and economic conditions. These efforts will continue to save our residents money over the long haul.”