Burgeoning capital requirements for sewer systems will require $110 billion of spending during the next 20 years, placing increasing importance on resource management, Standard & Poor's Corp. said in the Aug. 24 edition of Credit Week Municipal.
Drawing from a recent needs duty by the Environmental Protection Agency, Standard & Poor's said the large capital spending requirements are "an important credit factor for both utility system revenue bond and GO bond ratings."
For utility revenue bonds, increased funding needs "often hurt financial performance and push rates up," Standard & Poor's said. General obligation bond ratings could suffer if inadequate sewage collection and treatment block economic development.
Consequently, management will play an increasingly important role, the agency said in the article.
"Managing rates and finances to maintain adequate flexibility, managing huge building programs to ensure regulatory compliance, and managing governing bodies and ratepayers to create an awareness of the challenges and required rate hikes are all crucial to maintaining creditworthiness," Standard & Poor's said.
