Moody’s Investors Service confirmed the City of Covina’s water revenue bonds’ A1 rating last week after putting the rating on review earlier this month.
The rating, which is based on “strong, stable liquidity and relatively high debt service coverage levels,” was reviewed because of a change in management, a lack of information about current and future financial projections and an unclear response to the drought.
Under this process, the municipality’s bond rating could have been withdrawn or changed if city officials did not provide the agency with the necessary information within 90 days. The city has $13.8 million in outstanding debt — not including interest — on water revenue bonds issued in 2010.
City Manager Andrea Miller said the agency’s confirmation of the bonds’ A1 rating was a testament to the city’s financial health. “It demonstrates that we are in a very strong financial position from a credit worthiness perspective,” she said.
Miller said staff were unable to respond immediately to some of the ratings agency’s requests because the city needed additional information from other regional water agencies about how they plan to help the city meet a 28 percent water-use reduction target this year.
But soon after the bonds were placed on review, the city submitted the remaining information.
“They were asking questions about what we were doing to meet the targets,” Miller said. “That is part of what Moody’s responsibility is … It’s part of their regular review process.”
On Tuesday, the City Council will consider a resolution to declare a Level 2 Water Supply Shortage and implement measures under city code that further restrict water usage. Covina derives its water from the Covina Irrigating Company and the Three Valleys Municipal Water District.
“We are looking to (residents) to increase their conservation efforts,” Miller said, adding that the community has already done “a remarkable job” to conserve water.
Under a Level 2 shortage, residents would be prohibited from washing their vehicles except when using handheld buckets or hoses with a shutoff nozzle. They would be prohibited from using potable water to refill swimming pools and could only refill pools one foot at a time. Commercial facilities would be required to use a recirculating water system.
