NEW YORK - (Business Wire) During the course of routine surveillance, Fitch affirms its 'BBB-' rating on approximately $49.1 million in outstanding Atlantic County Utilities Authority, NJ (ACUA or authority) solid waste system revenue bonds, series 1992. The Rating Outlook is Stable.
The BBB-' reflects the ACUA's strong fiscal management, stable financial operations and debt service coverage, and financial flexibility provided by ample reserves. The authority's future required capital needs are minimal. While the ACUA has performed well in the face of a changed competitive environment and litigation, the 'BBB-' rating and Stable Rating Outlook largely reflects the authority's dependence upon continued state subsidies for debt service payments and a reduction in tonnage due to the overall economic downturn and decline in the casino sector in Atlantic City. Additional competition from a private entity will add pressure to financial operations. The competitive operating environment in the solid waste industry in the past decade, coupled with ACUA's heavy debt burden, has resulted in the authority's continual reliance on state support. The state subsidy for debt service payments continues to allow ACUA to reinvest surplus funds into capital projects for system maintenance. Consistent state payments over the last nine fiscal years provided a reasonable level of assurance in the state's commitment to maintaining ACUA's continued stable operations. The state subsidy payment in 2008 was reduced and Fitch will monitor future subsidy payments to the authority.
The ACUA must request the funds from the state prior to each semi-annual debt service payment and while there is no legal requirement, the state has provided a level subsidy since 2003. State support for all local solid waste systems in fiscal 2009 is budgeted at $30 million, representing a decline from fiscal 2008's budgeted amount of $35 million and a de minimis 0.1% of total state appropriations. The trustee has waived replenishment of the partially depleted debt service reserve fund as long as state monies continue to flow into the system.
In addition to the state subsidy, strong financial management has kept the ACUA's fiscal position stable. Audited 2007 results show over $16 million in reserves for operations, land fill closure, capital and other post employment benefits (OPEB). The actuarially accrued OPEB liability for solid waste totals $8 million and only 44% remains unfunded.
Fitch issued an exposure draft on July 31, 2008 proposing a recalibration of tax-supported and water/sewer revenue bond ratings which, if adopted, may result in an upward revision of this rating (see Fitch research 'Exposure Draft: Reassessment of the Municipal Ratings Framework'.) At this time, Fitch is deferring its final determination on municipal recalibration. Fitch will continue to monitor market and credit conditions, and plans to revisit the recalibration in the first quarter of 2009.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings
Ann G. Flynn, 212-908-9152
Eric Kim, 212-0527 (New York)
Media Relations:
Cindy Stoller, 212 908 0526 (New York)
cindy.stoller@fitchratings.com
