Mod: It is important to note that Sierra Madre is making interest only payments on the 2003 bonds, which is an extremely expensive way to go. Here is Standard & Poor's 1998 announcement (link):
Sierra Madre Financing Authority, CA Bonds Assigned A+ SPUR by S&P
NEW YORK, April 30 /PRNewswire/ -- Standard & Poor's today assigned its
single-'A'-plus underlying rating (SPUR) to Sierra Madre Financing Authority,
Calif.'s water revenue refunding bonds series 1998A dated May 1, 1998 due
May 1, 2015. The bonds, which are expected to receive a triple-'A' rating
based on bond insurance, are scheduled to sell the week of May 11, 1998.
The underlying single-'A'-plus rating reflects the following strengths:
-- Significantly improved and strong financial performance,
-- Manageable capital plan with no future debt requirements, and
-- Low rates and a stable primarily residential customer base.
A credit concern is that approximately 30% of annual water requirements
is dependent on groundwater pumping credits associated with seasonal rainwater
runoff. Sierra Madre obtains all of its water from groundwater and has
adjudicated groundwater pumping rights that provide approximately 70% of
annual water requirements.
Although the city routinely exceeds its adjudicated
pumping rights to meet its average daily demand of 2.48 mgd, it receives
credit for captured canyon rainwater runoff, which recharges the groundwater
basin through the city's own spreading grounds. With this additional credit,
the city has adequate overall pumping rights, but is subject to seasonal
rainfall constraints. Additionally, as a member of the San Gabriel Valley
Municipal Water District, the city has access to supplementary groundwater
supplies when adjudicated pumping rights and credits cannot meet water needs,
which last occurred in 1983. This supplementary water supply is adequate to
meet the city's estimated growth during the next 30-40 years.
The bonds are secured by installment payments that the city has pledged
as a first lien on the net revenues of its water enterprise. The bonds are
being issued for refunding purposes and capital improvements consisting of a
new well and seismic upgrades of water storage reservoirs. Located 17 miles
northeast of downtown Los Angeles, Sierra Madre (population 11,300) is a
bedroom community with household wealth levels that exceed state levels by 23%
and national averages by 28%. The city provides water service to a stable
customer base that is primarily residential.
Poor management in the early 1990s resulted in leaving the water
enterprise with no liquidity by the end of fiscal 1994. However, since 1994,
rate increases have been imposed that have restored liquidity to a strong cash
balance of $2.1 million by the end of fiscal 1997, equivalent to over three
years of operating expenses. Coverage of annual debt service has also
increased to 5.54 times (x) in 1997 from 1.73x in 1994. The new money portion
of this bond issue doubles the enterprise's debt but coverage is expected to
remain a still strong 2.35x through 2002.
Bond proceeds will fund a three-year, $2.6 million capital plan. Additional
annual system replacement costs of approximately $450,000 can easily be
funded by net system revenues with no additional debt requirements. Monthly
rates are currently $16.90 for 7,500 gallons of consumption and when combined
with a low monthly average sewer bill of $5 (sewer service provided by the
Los Angeles County Sanitation Districts), the combined monthly bill is a low
$21.90. No water rate increases are planned through 2002.
The outlook reflects the expectation of sound financial management of the
water enterprise and continued strong financial performance. Additionally,
coverage margins provide flexibility to absorb fluctuations in water usage due
to prolonged drought and wet weather conditions, Standard & Poor's said. --
SOURCE Standard & Poor's CreditWire
Mod: One more thing that might be interesting to note. While back in 1998 the aforementioned Sierra Madre water bond refunding could be accomplished at reasonable interest rates due to that A+ rating mentioned above, no such deal could ever be made today. Which is a shame since the Water Department is being dinged for some very high 5% interest rates for its 2003 series bonds. The reason for this being Sierra Madre's water bonds are currently rated junk. The following comes from a May 2015 report issued by Moody's (link).
Mod: It was a long trip down to get to where we find ourselves today.