Summary: Port Huron, Michigan; Water/Sewer

S&P Global Ratings has lowered its long-term rating on Port Huron, Mich.'s water supply system revenue bonds to 'A-' from 'A'. The outlook is stable. The downgrade reflects the application of our revised criteria effective Jan. 19, 2016, as well as persistently vulnerable all-in coverage ratios, defined by our criteria as ratios below 1.1x. While Port Huron adjusts water and sewer rates on an annual basis, adjustments have only been sufficient enough to cover annual operating and debt service costs with no additional margins. We base this assessment on our calculation of all-in coverage, which is essentially a "cash-flow" coverage calculation that considers the amount of net revenues available to pay all debt service costs of the water fund; in

...S&P Global Ratings has lowered its long-term rating on Port Huron, Mich.'s water supply system revenue bonds to 'A-' from 'A'. The outlook is stable. The downgrade reflects the application of our revised criteria effective Jan. 19, 2016, as well as persistently vulnerable all-in coverage ratios, defined by our criteria as ratios below 1.1x. While Port Huron adjusts water and sewer rates on an annual basis, adjustments have only been sufficient enough to cover annual operating and debt service costs with no additional margins. We base this assessment on our calculation of all-in coverage, which is essentially a "cash-flow" coverage calculation that considers the amount of net revenues available to pay all debt service costs of the water fund; in Port Huron's case, this water fund pays debt service on revenue, state revolving fund (SRF), and limited-tax bonds. All-in coverage is a key metric that helps determine the financial risk assessment. Generally, for most recent historical audited...

Summary