With dry hydrologic conditions in California depleting reservoirs, safe bets see a drop in credit ratings. Water agencies in the state were considered safe bets because their revenues are derived from fees rather than taxes—and therefore are somewhat insulated from the politics than municipalities. But with State Water Project (SWP) reservoirs holding 66% of average, and DWR announcing an initial SWP allocation of just 5%, supplies will be diminished—which means lower sales and lower revenue.
While some analysts don’t see a way around a supply shortage, other still see water agency bonds as safe under the argument that the agencies can raise rates to offset revenues lost to water shortages.
Read more about this from Bloomberg
Written by Marta Weismann