The New York City Municipal Water Finance Authority is preparing for its second issuance this year, totaling $450 million in fixed-rate second resolution bonds. This issuance includes $400 million for system improvements and $50 million for refunding purposes. The authority has a total outstanding debt of $33 billion, and it issued $1.4 billion in March. The current ratings from S&P Global Ratings, Moody’s Ratings, and Fitch Ratings are stable, reflecting the authority’s strong financial profile, management autonomy, and legal protections for bondholders.
With a service area covering 9.3 million people, the authority delivers a billion gallons of water daily to New York City. Revenue has been robust, with a 6.3% increase in fiscal 2022 due to higher usage, lower delinquency, and rate hikes. The Water Board, with the authority, has the power to adjust rates as necessary without oversight. The board plans to increase rates by over 5% annually for the next four years while projecting a 1% decline in water consumption per year from 2024-2028.
Moody’s Aa1 rating reflects a claim on revenue by an essential service utility, healthy liquidity, and strong rate management. The report mentions that the second resolution bonds’ claim is subordinate to the first resolution bonds but highlights the modest annual debt service on first resolution bonds. Fitch’s report states that the authority’s leverage has been improving, reaching 7.3x in 2023 after a peak of 8.3x in fiscal 2021. However, the challenge remains with rent payments to New York City, which could impact leverage levels in the future.
The authority’s capital spending averages $2.4 billion from 2024-2028, aiming to support a low life cycle ratio. The capital improvement plan from 2024-2033 includes $28.3 billion, with significant allocations for sewers, water pollution control, and water distribution. The authority anticipates issuing $10.548 billion of new money bonds from 2024-2028 to fund these capital projects. These projections align with Fitch’s expectations of declining leverage over time, provided the trends continue as planned.
In a report by New York State Comptroller Thomas DiNapoli, concerns were raised regarding cybersecurity threats to water systems. While the current report did not include data from New York City, the authority collaborates with city, state, and federal entities to mitigate cyberattacks. Working with the New York City Office of Information and Technology, New York City Cyber Command, and the FBI’s Joint Terrorism Task Force, the authority is taking proactive measures to safeguard its infrastructure. Despite not carrying cybersecurity insurance as per New York City policy, the authority is focused on enhancing its security posture against potential threats.
The New York City Municipal Water Finance Authority’s upcoming issuance reflects its commitment to infrastructure improvement, fiscal responsibility, and risk management. With stable ratings, robust revenue generation, and strategic capital planning, the authority is well-positioned to navigate economic, regulatory, and operational challenges. By addressing leverage concerns, capitalizing on revenue growth, and enhancing cybersecurity measures, the authority can sustain its financial strength and uphold its essential service to millions of New Yorkers.