The 'AA' rating on Huntsville, Ala.'s water system revenue warrants reflects the system's: Expanding economic and customer base, which is characterized by above-average wealth and income levels; Exceptionally low water rates compared to those of both regional and national peers, resulting in tremendous rate-setting flexibility; Sound financial performance and position, which has generated solid debt service coverage levels of 1.7x in fiscal 2002; Expansion of its treatment capacity to meet growing demand; Moderate capital improvement program, which is expected to be funded from surplus cash; and Strong, proactive management team. A degree of economic concentration in the aerospace and defense sectors is an offsetting rating factor. A pledge of net revenues of the utility system secures the warrants. Located in
