The New York City Municipal Water Finance Authority is set to make its second issuance of the year in the municipal bond market. This issuance is valued at $450 million, with $400 million allocated for system improvements and $50 million for refunding. According to Andrew Rothbaum, who manages investor relations for the authority, the funds will be used to reimburse prior spending on various water and wastewater projects. The authority is carefully monitoring market conditions to determine which bonds, if any, will be refunded.
The New York City Municipal Water Authority boasts an impressive financial profile and strong ratings from credit agencies. S&P Global Ratings, Moody’s Ratings, and Fitch Ratings have all affirmed the authority’s ratings at AA-plus, Aa1, and AA-plus respectively, all with stable outlooks. Fitch’s report highlights the authority’s strong financial profile, low leverage, and legal protections for bondholders, including a gross lien on pledged water and sewer revenues. This provides bondholders with a level of security in the event of any financial setbacks.
The authority’s revenue comes from providing water and sewer services to a large and diverse service area, reaching 9.3 million people. While revenue took a hit during the pandemic due to lower water usage and increased delinquencies, it increased by 6.3% in fiscal 2022. This increase was attributed to higher usage, lower delinquency rates, and an increase in rates. The Water Board has the autonomy to adjust rates as needed, which led to a 7.6% revenue increase in fiscal 2023. The board plans to continue raising rates by more than 5% annually for the next four years.
Fitch’s report noted that the authority’s leverage has fluctuated due to external factors such as rent payments to New York City. While leverage dropped to 7.3x in 2023, it is expected to reach 8.3x by FY2028 due to increasing rent payments. Fitch anticipates a continued decline in leverage over time, as failure to do so could result in negative rating implications. The authority must navigate these financial challenges while maintaining its excellent credit rating and financial stability.
New York State Comptroller Thomas DiNapoli has emphasized the need for water systems to protect themselves from cyberattacks and natural disasters. The New York City Municipal Water Authority collaborates with various city, state, and federal entities to prevent cyber threats. Despite this, the system does not carry cybersecurity insurance as part of New York City policy. As the authority plans for future capital improvements and bond issuances, cybersecurity remains a critical aspect of its operations to ensure the continued delivery of safe and reliable water services to millions of residents.
The New York City Municipal Water Finance Authority remains a pillar of financial stability and infrastructure in the region. With prudent financial management, strong credit ratings, and a focus on system improvements, the authority is well-positioned to meet the challenges of providing essential water and sewer services to millions of residents.