HomeMy WebLinkAbout0439.095--.' .
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City of Palo Alto
City Manager's Report ------_ .. _---.
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: UTILITIES
DATE: OCTOBER 18. 1995
SUBJECT: StJlDd.n1 &< Poors Bond RoIiD g
REOUEST
This report is 10 infoon !he Cowd of. re«nt StlL"K!ard &; Poor.; (S&:P)
press ""lease reprding Ille Cily of Palo Mo', Revenue Bond Rating.
RECOMMENDATIONS
This report is for information only aDd 00 aclion is required.
~ dCX IMP! .lCATIONS
CMR!439:95
The attached MP press ,elease was lfu,1ributed at !he NCPA Annual Meeting on September
28, 1995. S&P affinns Ille Gty of Palo Ahn !.c'tili!ies' AA+ Revenue Bond Rating. The
rating retleets !he utiliti", strong fuumcial pe!"bmance and vibrant local and regional
economy.
AI !he conference, an MP spokesperson reecgnized P • .Io Mo as one of only two
CaIifomia municipal utilities meriting a "somewhat above average" business position
a.sse5m:le1lt Palo Alto's low rates and Gosts and. good management were cited as supporting
Sd:p'. business position assessment
CMR:439:95 Page I of 2
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A .. r~..",..tion of Palo AIr.,'s Revenue Baed Rating sIloak! help maintai!;
Palo A!Io's 10 ... financing <051 for future debt is.<ueS.
There is no environmental .. ..,.smcnl required.
ATTACHMENTS
Standard &; Poors Cred"lt Wire pr= release dated 912Si9S.
PREPARED BY: Doug Bocdgnooe, Manager of Supply Reoources
DEPARTMEN'llIF.AD APPROVAL, //~
~J.MRI
0( L'tJ1.ties
CITY MANAGER APPROVAL:
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CMR:439:95 Page 2 of 2
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ID: PH
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HEADLINE: S&P ALzs Palo ~to,CA(Combine1 UtilI AA~ Rev Bnd Rtg
NY --Standard , Poor~s Creditwire 9/25J95 --Standard, Poor's affirms
~ts double-oA'-plus rating on Palo Alto. Calif.'s utility revenue bonds
series 1990A, 199~ and 1995...l\.~
rne ratings outlook is stable.
The rating on the city of Palo Alto's revenu~ ~Jd~ reflects the
utility's strong financial performance, and vibra~t local and regional
economy .. The utility department consists of electric f59% of total revenues),
gas t13% of total revenu~s), water ~11% of total revenues}, wastewater (e% of
to-tel revenues), and storm. drainage 0% of total reven\.l~s), all of which are
self-supporting. The rating also reflects the electric utilit~s ~somewhat
above average-business poSition assessment~ Incorporated in the ~somewhat
above averaqe-business poSition is the follo~ing:
--The utility's low rates~ which are 20%-52% lower than the state
averages,
-,-Average system costs, at 5~ 46 cents per cwh,. which are BSI of the
regional average, and
--Good management, which has been successful in securing good
relationships with the utility"s largest customers ~~d educating its city
council as to the changes affecting the electric industry.
Additionally,. the business position reflects the utility's resource
concentration in hydroelectric energy accounting fc,r mere than 90% of the
citY's energy capacity. However, though the utility" s en::rgy may be
concentrated in one type of resource,. it derives its power from a various
sources in~luding Western Area Power ~175mw), Washington Water Power (11.3mw)
and Bonneville Power Administration (20~w). The city has historically relied
on Western Area Power~s Io~ cost power for more than 90% of its energy.
However, due t~ Western Area Power's new rate structure# the city has
lessened its dependence on tbe ;;..dministratio'n to 67% in 1994 and expects to
maintain this level ¢ver th~ long-term. The city"s contract with the
adminIstration is due tO,expire in 2DD4~ but it is expected to be amended by
19'98. Current projections call for t.he city to maintain 90%-95% of its
current allocatioo l ,_ which ... ill allow the city the flexibility to maintain its
favorable rate advantage over other local municipalities and inVestor-owned
utilities. Average residential rates at 5.46 cents per r~h and average
i~du5trial rates a't 5.93 cents per kwh are rO\Jghly 52% fres.idential } and: 20%
(industrial} below the state and PacIfic Gas , Electric Co. rate averages.
The utility system's finan~ial perfonmance has continued to be very
strong as evidenced by coverage of annual debt service of at least 20 times
(x) since 1~90 and is projected to remain above 20x through the end of the
decade. The city does have a significant ~unt of oft-balance sbeet debt
associated with !Jorthern california Power Agency and the Transmissicn Agency
of Northern California. Coverage of the ci tyr s debt service and off-balance
sheet debt exceeded 6.S3x in 1994. Additional, each of the utilities
maIntains a fully funded op~ratinq reserve equal to ]5% of sales re7enUes,. by
city council policy.
OO'l'LOOK: Stable.
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The outlook reflects the utility system's exceptional financial
flexibility, rate competitiveness. and cperational efficiencies as a combined
utility. tach of these stcen.gths are expected to offset any Wor5t case
outcome of the Western Area Power contract negctiatiocs. Ho~ever, Standard,
Poor'.$ will continue to monitor the events surrounding the potential sale -of
the administration and the impact it would have on the utilities long-term
credit ratin.g, Standard' Poor's said. CreditWire
Contact: Brad Driver, San Francisco <415)165-5,01(,
Liz Isaacs, San Francisco (415) 765-5032.