Press Release from the City Regarding Moody's Downgrade

December 5, 2013  
FOR IMMEDIATE RELEASE 
CONTACT: CATHY SALCEDO, PIO 
CSALCEDO@SANJUANCAPISTRANO.ORG

SAN JUAN CAPISTRANO - In Spring 2011, the City’s credit rating for its water debt was downgraded from AA to A by Fitch and Standard & Poor's Credit Rating Agencies due to the financial issues being faced at that time by the City’s water enterprise system; however, Moody's never took action at that time. 

Moody’s original credit ratings on the City’s 2002 and 2004 Certificates of Participation were both A3. In 2009, Moody’s had upgraded the City’s credit rating to A1 as part of an overall market recalibration. Recently, the City was contacted by Moody’s to review the issues that occurred from 2008 through 2010 as you will see throughout the report and to obtain current information. Yesterday, the City was notified that Moody's is downgrading our water debt to a comparable rating that we currently have with Fitch and Standard and Poor's which is basically from a AA to an A (A1 to A3 on the Moody’s rating scale).

Moody’s announcement does not come as a surprise to the City, since no action was taken by Moody’s in 2011. The City has made significant progress since 2010. The City’s Strengths listed in Moody’s report noted the relatively large size of the water system and the system’s access to significant level of local ground water. Also noted is the City’s increased and consistent production from the Groundwater Recovery Plant along with effective management of operations, which reflect the system’s ability to maintain stability in operating costs over several recent years.

Moody’s acknowledges that the annual debt service coverage and cash position have improved in recent years, keeping the City at an A3 credit rating and that sustained improvement in these areas could move the rating up. It is also noted that in April 2013, Fitch affirmed the City’s A credit rating on its water debt with a stable outlook due to the City’s improved financial position. 

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