Yuma's financial health gets good rating
The city of Yuma got some good news regarding its financial health with its annual rating report from Standard & Poor's regarding the city's municipal bonds.
“After such review, we have affirmed the ‘A+' rating and stable outlook,” Standard & Poor's Ratings Services wrote the city this month. The rating referred in particular to the city's water and wastewater revenue bonds held by Yuma Municipal Property Corp. for the city of Yuma.
The rating represents a slight improvement over previous years, noted City Administrator Greg Wilkinson. “It's a very positive report.”
He said the city was able to maintain its A+ rating for its municipal coverage ratio even throughout the economic downturn, in contrast to many other cities that fared badly during the Great Recession.
However, in the past Yuma had been given a “cautionary” outlook, Wilkinson said. “This year we were given a stable outlook. That is extremely good. That means the city is financially solid.”
The stable outlook or forecast will help the city keep its good bond rating and reduce the cost of borrowing when the city wants to go out for more bonding, Wilkinson explained. “This is really good for the future.”
That Yuma has weathered the downtown as well as it did, resulting in maintaining its A+ rating and improving its forecast, is a tribute to the city's employees, Wilkinson said.
“All the employees have done a great job of watching expenditures and the rating bears that out,” he said. “Even with revenue still significantly down, we've been able to keep our bonding rating.”
In reference to the city's utility revenue bonds, Standard & Poor's wrote that the rating reflects:
• A growing customer base, combined with a diverse revenue base (the 10 leading water customers account for just 4 percent of billed water revenues);
• Affordable rates, even with city incomes we deem just adequate;
• Strong financial performance when factoring in additional cash received from capacity fees; and
• No additional debt plans reported by management at this time.
The summary continued: “Offsetting these strengths is a reliance on capacity fees to maintain at least adequate debt service coverage. Without these fees, net revenues typically cover debt service on revenue bonds and Arizona Water Infrastructure Finance Authority loans by just over 1 time, which we consider adequate.”
Yuma provides water service to about 29,000 customers and sewer services to 22,000 customers. Since 2007, both systems have continued to expand at a compound average annual rate of 1 to 2 percent.
“The stable outlook reflects our expectation that the financial characteristics of the combined water and wastewater systems will remain strong, given the stable and gradually expanding customer base,” Standard & Poor's reported.