Texas Border Business
EDINBURG, Texas – Fitch Ratings has reaffirmed the rating on the revenue bonds for the City of Edinburg, maintaining a solid ‘AA-‘ rating for the city’s utility system revenue refunding bonds series 2015, 2017, and 2021, totaling $22.2 million.
Fitch Ratings also assessed the Stand-Alone Credit Profile (SCP) of Edinburg’s water and wastewater system at ‘aa—’. This SCP signifies the system’s credit profile on a stand-alone basis, independent of its relationship with and the credit quality of the city.
The ‘AA-‘ utility revenue bond rating, coupled with the ‘aa-‘ SCP, underscores the system’s robust financial profile within the framework of ‘Very Strong’ revenue defensibility and ‘Very Strong’ operating risk profile, both evaluated at ‘aa.’ Notably, the system’s leverage, measured as net adjusted debt to adjusted funds available for debt service (FADS), stood at a commendable low of 8.8x in fiscal 2022. Fitch’s Analytical Stress Test (FAST) rating case projects a modest decrease to 7.3x over the next five years, maintaining comfortable headroom for the rating.
Edinburg’s water and wastewater system is poised to enter a capital-intensive phase over the next two to six years, focusing on expanding system capacity to meet escalating demand. The system intends to finance the capital improvement plan (CIP) through a combination of revenue bonds and loans from the Texas Water Development Board (TWDB). This uptick in CIP spending and associated debt could lead to sustained higher leverage without accompanying rate adjustments to bolster improved FADS.
However, the recent adoption of rate adjustments, averaging around 11% annually through 2027, is anticipated to generate ample FADS to sustain the rating. These adjustments demonstrate the city’s proactive approach to maintaining the financial health of its utility system while meeting the evolving needs of its residents.
Fitch Ratings’ reaffirmation of Edinburg’s ‘AA—’ rating underscores the city’s commitment to sound financial management and infrastructure development, ensuring the continued delivery of reliable utility services to its constituents.
