As many public agencies have faced difficult financial realities because of the ongoing pandemic and economic downturn, Eastern Municipal Water District has recently been reaffirmed as a model of financial stability by the major rating agencies.
EMWD in September was reaffirmed as an Aa2-rated agency by Moody’s Investors Service for its subordinate revenue bonds, providing further support of EMWD’s longstanding record of being a responsible steward of public funds. EMWD is also the holder of a AAA-rating for its parity revenue bonds by Standard & Poors – the highest possible rating that can be assigned.
EMWD’s excellent ratings result in lower interest rates when issuing bonds for critical infrastructure projects that enhance system reliability, while also keeping rates low for our customers.
“EMWD is incredibly proud of its ratings with the major rating agencies and the direct benefit those provide to our customers,” EMWD Board President Ron Sullivan said. “Our customers have entrusted in us to be stewards of their funds, and we take that responsibility very seriously.”
EMWD’s allocation-based rate structure – and its recovery of fixed costs through daily service charges instead of volumetric water use – has been cited as a major factor in its high-rating with the credit services, including Moody’s, Standard & Poors, and Fitch.
EMWD’s strong financial standing has benefited ratepayers. A recent study by the University of California, Riverside (UCR), has shown monthly water and sewer costs accounted for approximately 1.5 percent of median household income in EMWD’s service area. That is well below the United States Environmental Protection Agency’s (EPA) affordability threshold of 4.5 percent for water and sewer services.
Among the other factors that Moody’s recently cited for EMWD’s financial strength:
EMWD’s rate-setting approach, including its willingness to adopt very nominal rate increases on an annual basis as opposed to large rate spikes after extended periods of no rate adjustments.
EMWD’s strong financial reserves policies that have prepared it for extended periods where revenue may be uneven, such as during the current COVID-19 pandemic, extended droughts, or other economic downturns.
EMWD’s manageable capital needs and no planned borrowing over the next five years, which is possible due to EMWD’s aggressive program to secure grant funding.
EMWD has taken other steps to create a more sustainable financial future for the agency and its customers. This includes shared financial responsibility among EMWD and its employees for current and post-employment benefits, its aggressive pursuit of external funding opportunities to reduce the financial burden on EMWD customers, and its commitment to funding policies to fully fund Other Post-Employment Benefit and pension obligations over an appropriate period of time.
“EMWD’s Board of Directors is committed to ensuring the financial stability of our organization so that our customers can receive safe and reliable water, wastewater and recycled water services at an exceptional value,” Sullivan said. “We remain steadfast in our commitment to continually act in the best interest of our ratepayers, and we are proud to have positioned EMWD as one of the most financially stable water providers in California.”
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