McAllen Public Utility Receives ‘AA+’ Bond Rating from Fitch

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Ratings based on strength of debt service and stable economic outlook

Texas Border Business

The McAllen Public Utility (MPU) recently went before Fitch Ratings for review on its upcoming bond series and received a rating of ‘AA+,’ viewing “the outlook for this rating as stable.” The bonds, set for $33.1 million, are for outstanding waterworks and sewer system revenue bonds.

“This rating reflects the strength and diversity of our economy here in McAllen, which the analysis highlighted,” said MPU Chairman Charles Amos.  The report stated that the “commercial trade with Mexico, healthcare, government and retails provides a well-diversified economic base that complements the traditional agriculture and tourism sectors….”

According to the rationale provided by the financial rating agency, Fitch Ratings assigned its ‘AA+’ rating and stable outlook to the McAllen Public Utility based on solid financial metrics, including its annual debt service coverage increasing and its exceptional rate flexibility, noting that “combined utility rates are very affordable and among the lowest of peer utilities, despite recent increases in 2016 and planned increases.  The rates fall well below Fitch’s affordability threshold of 2% of median household income.”

The utility’s credit profile is made up of its primarily residential accounts, including 47,000 water and 42,000 sewer customer accounts, serving a population of over 140,000.  Moderate customer growth of 1.6% over the past five years helped to affirm the sustained strong financial metrics. This gives the MPU a strong debt service coverage for the future. Additionally, the system has a system of healthy financial performance.

MPU General Manager Mark Vega, was extremely pleased with the bond ratings, stating that the rating was also indicative of the fiscally responsible and conservative approach that the McAllen Public Utility has maintained in managing the utility’s finances and resources, incurring debt slowly to be able to continue providing enough clean water and have capacity at its sewer treatment plants to meet the current and future demands of the rapidly growing city of McAllen.

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