A major bond-rating agency is reporting increased confidence that the New Orleans Sewerage & Water Board can pay its debts -- an improvement that city officials attribute to the 10 percent increase in sewer and water rates that took effect in January. Standard & Poor's Ratings Services on Tuesday moved the S&WB's bonds for its water system from BB+...
A major bond-rating agency is reporting increased confidence that the New Orleans Sewerage & Water Board can pay its debts -- an improvement that city officials attribute to the 10 percent increase in sewer and water rates that took effect in January.
Standard & Poor's Ratings Services on Tuesday moved the S&WB's bonds for its water system from BB+ -- the top end of "junk bond" status -- to BBB-, or the bottom rung of medium-quality investments. The rating for the agency's sewer system bonds was raised from BBB to A-, according to the S&WB.
While incremental, the ratings boosts could let the water board save money on future interest rates and finance charges as it issues new or refinanced bonds to raise money to help pay for an estimated $3.3 billion overhaul of its infrastructure.
The higher water and sewer rates, which the City Council approved in December, are projected to generate $583 million for the S&WB over the next eight years. As a result, New Orleans residents and businesses can expect to see their rates jump 10 percent each year -- basically doubling by 2020.
Still, the S&WB has a long way to go to reach the financial security it enjoyed before Hurricane Katrina. That 2005 storm trashed the S&WB's bond rating along with its power station, its pumps and miles of water and sewer pipes.
The nation's other two major bond-rating agencies in 2011 gave the S&WB a mixed bag of new ratings. In August 2011, Moody's Investor Services downgraded the water board's rating for its sewer bonds, affecting $172 million in outstanding debt, according to the Board of Liquidation, City Debt, the city's debt manager. In February 2011, Fitch Ratings upgraded the S&WB's sewer and drainage bond ratings, but downgraded its water bond rating.