Fort Myers utility system revenue bonds affirmed at A+ with stable outlook

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Fort Myers bonds rating affirmed

Highlights

Fitch Ratings affirmed the A+ rating and stable outlook on all Fort Myers utility system revenue bonds, citing strong revenue defensibility and operating risk profile.
Net adjusted debt to adjusted funds available for debt service is 5.5x in fiscal 2024, expected to peak at 7.8x in fiscal 2028 but remain within rating headroom.
The $508 million fiscal 2026-2030 capital plan and upcoming water reclamation facility moderate after removal of projects from a consent order, with rate hikes of 16% for water and 24% for sewer in fiscal 2025.

Credit profile and capital plan

As reported by Fitch Ratings, the agency has affirmed the 'A+' rating on all Fitch-rated outstanding utility system revenue bonds issued by Fort Myers, Florida, and assessed the system's Standalone Credit Profile at 'a+'. The bonds are secured by a first-lien pledge on the system's net revenues, including pledged impact fees.

Fitch says the rating is supported by a strong financial profile, strong revenue defensibility and a strong operating risk profile. Net adjusted debt to adjusted funds available for debt service stands at 5.5x in fiscal 2024 and is expected to rise to a peak of 7.8x in fiscal 2028 under Fitch's analytical stress case, while still retaining headroom within the rating.

The utility system's budgeted capital improvement program for fiscal 2026 through 2030 totals about $508 million. Fitch says the program moderates after the elimination of several projects driven by a consent order, while a new water reclamation facility is underway.

Service area growth and rating sensitivities

Fitch says the city retains legal authority to adjust rates without external oversight, supporting revenue flexibility. Fiscal 2025 water and sewer rates increase by 16% and 24%, respectively, and the monthly residential bill is considered affordable for about 64% of the service area population based on standard usage assumptions.

The service area includes the city and unincorporated parts of Lee County, with water, reclaimed water and wastewater services. Customer growth posts a five-year compound annual growth rate of 3.2% through fiscal 2024, while median household income stands at nearly 79% of the national median and unemployment is 4%, about 7% below the national level over the past four years.

On operations, Fitch says the system complies with U.S. Environmental Protection Agency regulations and has completed a lead service line inventory that identifies no lead service lines. The agency adds that EBITDA margins are volatile because of variable revenue streams from Lee County and other partner agencies, and says a downgrade could follow if leverage exceeds 8.0x on a sustained basis in its rating case, while stronger EBITDA stability and sustained leverage at or below 6.0x could support an upgrade.

Our earlier article on Sacramento Municipal Utility District’s 'AA' electric revenue bond rating affirmation outlined Fitch’s view of the utility’s strong financial metrics, solid operating performance, and diversified power supply as key supports for credit strength. We also noted SMUD’s competitive rates and ongoing infrastructure and technology investment aimed at maintaining reliability and positioning the system to manage energy-market volatility over the long term.

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