As a public utility, Tacoma Public Utilities believes in prudent financial stewardship of the resources entrusted to it by the customers it serves. This fiscal leadership was reflected in strong bond ratings for both the Power and Water utilities in recent announcements from Fitch Ratings, S&P Global Ratings and Moody’s. Excellent bond ratings equate to the utility having to pay less for its debt over time, which long term means savings for customers.
Moody’s upgraded Tacoma Water’s water system revenue bond and regional water supply system bonds from Aa2 to Aa1. This increase is particularly remarkable, especially given the recent loss of WestRock, Tacoma Water’s largest customer. Moody’s wrote of Tacoma Water:
- Excellent rate-setting record which was demonstrated following the recent closure announcement by its largest customer, with rate increases to maintain financial metrics, as well as equitable and affordable customer rates
- Long-term financial stability, including sustained strong liquidity and debt service coverage
- Sophisticated management of regulatory compliance and ten-year capital program
- Strong system characteristics, including ample capacity and water resources (high-quality, long-lived water supply)
- Broad and diverse customer base, served by a local system larger than the city and augmented by a regional second water supply
- Growing service area and improving resident income levels
S&P Global also affirmed Tacoma Water’s strong AA+ credit rating, which was upgraded by S&P in 2022. This reinforcement of the upgraded rating emphasizes the financial strength of Tacoma Water. “Despite the recent unprecedented loss of our largest customer, Tacoma Water was well-prepared to put plans into action and maintain operations and long-term financial stability on behalf of our customers,” said Jodi Collins, Financial Stewardship Manager for Tacoma Water. “Recognition like Moody’s ratings upgrade serves as a signal to the capital markets of the overall financial strength of Tacoma Water and the regional water supply system (RWSS). It positively reflects on our commitment to be good stewards of customer funds.” S&P echoed this sentiment restating that Tacoma Water’s approach to financial stewardship is well-judged:
- Despite the loss of its largest customer, the utility has implemented necessary rate increases to maintain a healthy financial profile
- The rating also reflects Tacoma Water’s consistently healthy financial performance including strong all-in debt service coverage levels and robust liquidity
- Further support for the rating is provided by the system’s stable customer base and robust long-range planning
- With the closure of the mill, we view the utility’s customer base as further diversified, with an opportunity to market excess capacity to new wholesale members or new businesses
- To help mitigate the financial impact of this loss, Tacoma’s city council adopted an additional rate increase of 5% . . . we view these adjustments as supporting the future financial performance of the utility in the near term
Fitch Ratings and S&P Global Ratings have confirmed Tacoma Power’s bond ratings at AA- and AA respectively, both with stable outlooks, reflecting Tacoma Power’s very strong financial performance.