Fort Worth drainage bonds upgraded to AAA as leverage improves
Fort Worth's drainage revenue bond rating is raised to the highest investment-grade level as the city's utility system posts stronger financial measures. The Stable Outlook reflects expectations that debt levels stay low and coverage of full obligations remains above 2.0x through fiscal 2030 despite planned borrowing.
Highlights
- Fitch Ratings upgraded Fort Worth, Texas' outstanding drainage revenue bonds to 'AAA' from 'AA+' due to improved financial metrics and recent rate increases.
- Leverage stands at 2.7x for fiscal 2025—the lowest in five years—and drops to well below 1.0x when restricted capital funds are included.
- Fitch expects leverage to remain below 5.0x and coverage above 2.0x through fiscal 2030, supported by rate hikes and organic customer growth.
Upgrade drivers and financial metrics
As reported by Fitch Ratings, the upgrade to 'AAA' from 'AA+' applies to Fort Worth, Texas' outstanding drainage revenue bonds, while the drainage system's standalone credit profile is assessed at 'aaa'. The rating action is tied to an improved financial profile after rate increases beginning in fiscal 2024 and reimbursements from a regional partner for capital costs incurred in fiscal 2024 and 2025.Fitch says leverage, measured as net adjusted debt to adjusted funds available for debt service, stands at 2.7x in fiscal 2025, the lowest level in the past five years. When restricted funds on hand for capital projects are included, leverage is well below 1.0x for the year.
Outlook for borrowing capacity and system operations
The agency says leverage is expected to remain exceptionally low, below 5.0x, and coverage of full obligations is expected to stay above 2.0x through fiscal 2030 under Fitch's Analytical Stress Test rating case. Planned rate adjustments and organic customer growth are expected to help offset the effect of future debt issuance.The bonds are secured by a first-lien pledge of the drainage system's gross revenues. The Stable Outlook indicates Fitch sees the system maintaining financial strength under its current operating and capital plans.
In our earlier coverage of Fitch’s BBB- rating on Hainan Rubber’s proposed subordinated perpetual securities, we explained how the instrument’s subordination and coupon-deferral features drove its placement below the issuer rating. We also outlined Fitch’s view of the group’s high leverage and liquidity position, alongside the role of state-linked support in maintaining access to funding.
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