The Olivenhain Municipal Water District (OMWD) has seen the credit rating for its revenue bonds upgraded from AA+ to AAA with a stable outlook.
Fitch Ratings, a global rating agency that offers independent credit opinions, cited historically high liquidity, manageable borrowing plans, conservative financial forecasting and equitable and disciplined rate-setting in making its upgrades.
AAA is the highest possible rating assigned by Fitch and OMWD is one of only a handful of Southern California water agencies that have achieved this pinnacle of financial excellence.
Fitch noted that based on audited financials, OMWD’s financial performance remains strong even in the most difficult operating environments, including a historic drought and sharp increases in wholesale water costs. Despite the stress of drought and resulting revenue reductions due to state-mandated conservation, OMWD maintains solid cash reserves and debt coverage, which Fitch expects to continue.
“We are proud that OMWD’s conservative fiscal policies have been recognized by Fitch, as a higher bond rating will bring real savings to our customers,” Larry Watt, Treasurer of OMWD’s Board of Directors, said in a release. “This upgrade is a testament to the well-founded board policies and principles guiding OMWD’s planning efforts.”
Despite annual water rate increases attributable primarily to increased wholesale costs, Fitch reported that OMWD rates remain affordable in the mature residential area with San Diego County’s diverse economy.
Higher bond ratings equate to a lower risk of default, so achieving an upgraded bond rating will help to alleviate the upward pressure on water rates resulting from increasing wholesale water costs. This will also afford OMWD lower interest rates when issuing bonds to finance critical new water facilities.
Fitch also praised OMWD’s water supply diversification efforts, noting these investments are positive for credit quality in the long term because they provide more reliable supplies to customers at more predictable prices. OMWD continues to aggressively expand its recycled water system and study the development of a brackish groundwater desalination facility.
— Submitted press release