The 'A-' rating on Philadelphia, Pa.'s water and sewer revenue bonds reflects the following weaknesses: Continued reliance on rate stabilization fund support, (projected to be depleted by 2008), to meet covenanted coverage levels; Weak demographic trends, which include long-term population decline, resulting in overcapacity within the water system; Weak, but stable, collections, resulting in a significant level of receivables, bad debt write-offs, and service shutoffs; and A sizable capital program. Positive credit factors include the following: Despite the reliance on rate stabilization support, financial performance has been stable. With the rate stabilization funds, coverage of senior-lien debt service is adequate at 1.20x, with 1.08x coverage of revenue debt, and transfers to the general fund, capital fund, and residual fund. Rates,
