Sanitation District No. 1 of Northern Kentucky (SD1) will realize over $23 million in interest savings through the refunding of its outstanding Series 2009A, 2010A and 2010C Build America Bonds. The bonds were reissued last week after Moody’s Investors Service upgraded SD1’s outstanding debt to Aa2 from Aa3.
The agency rating upgrade reflects the favorable renegotiation of SD1’s consent decree with the US Environmental Protection Agency that extends the deadline for completion of its sewer overflow mitigation program to 2040, an estimated $700M reduction in capital project costs to meet the consent decree requirements and a new residential base rate restructure that offsets the negative effects of consumption decline.
The rating also reflects SD1’s sizable and stable service area with healthy resident income levels, strong liquidity that is projected to decline annually through fiscal year 2024 to a still satisfactory level given planned cash-funded capital projects, favorable legal covenants and an above-average debt burden driven by mandated capital projects.
“We’ve worked to develop a strategic financial plan to meet the District’s obligations and ensure long-term affordability for our ratepayers,” said SD1 Executive Director Adam Chaney. “This was a significant factor in renegotiating our consent decree and implementing a new residential sanitary rate structure. I’m pleased that the rating agencies have taken notice of the progress made over the last several years and helped provide yet another opportunity for SD1 to save ratepayer dollars.”
