LOS ANGELES - Standard & Poor's Corp. last week assigned an A-minus rating to the first installment of bonds planned for San Diego's new sewer improvement plan, while Moody's Investors Service rated the debt A1

The San Diego Public Facilities Financing Authority plans to sell 8250 million of sewer revenue bonds later this month through underwriters led by Morgan Stanley & Co.

Standard & Poor's said its rating rcflects a "strong, generally diversified economy," along with a "high level of internally generated funds available for capital purposes" that help limit debt requirements.

The rating agency said it also factored in "the challenges and uncertainties San Diego faces as it commences the financing of its large capital improvement plan" and "rate pressures which are likely to arise as the combined water and sewer bills exceed regional and national averages."

The capital improvement program will cost from $2.1 billion to $3.2 billion "depending on the city's success in obtaining a congressional amendment to rules imposed by the [federal] Clean Water Act and litigation with the Environmental Protection Agency," Standard & Poor's said.

Total bond sales are expected to run from $1 billion to $1.6 billion, depending on the level of expenses.

"Projections show debt service coverage in excess of two times almost every year during the forecast period" if rate increases are included, Standard & Poor's said.

Moody's said its rating reflects "sound financial operations, with ample net revenues and comfortable reserves."

The sewer system serves San Diego and several adjacent communities. which Moody's characterized as a broad service area with a diverse customer base.

The city's demonstrated commitment to raising rates will be an important factor in maintaining credit quality, particularly if the higher level of debt is incurred," Moody's said.

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