Joliet water and sewer system senior lien rating affirmed at A by KBRA

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Joliet water, sewer rating

Highlights

KBRA affirmed the City of Joliet, Illinois Waterworks Sewerage System Senior Lien Obligations' long-term rating at A with a Stable Outlook.
KBRA cited Joliet City Council's rate-setting flexibility, willingness to increase rates, strong liquidity, and strategic capital planning as key credit strengths.
KBRA warned that cost escalations in the WTSP and WMRP projects could increase financial burden, raise leverage, and require substantial future rate hikes.

Rating action and credit factors

As reported by Kroll Bond Rating Agency, the long-term rating on the City of Joliet, Illinois Waterworks Sewerage System Senior Lien Obligations remains at A with a Stable Outlook.

KBRA says the assessment is supported by the Joliet City Council's rate-setting autonomy and its willingness to raise rates to increase revenue ahead of and during the system's major capital program. The agency also cites sound historical financial results, strong liquidity and a comprehensive strategic capital planning process aimed at addressing long-term water sustainability concerns.

At the same time, KBRA notes that the WTSP and WMRP are substantial capital undertakings for the city. The agency says further cost escalation could create a significant financial burden, while financing those projects is set to increase system leverage considerably and substantial rate increases may weigh on affordability over the longer term.

Upgrade and downgrade triggers

KBRA says an upgrade would depend on sustained financial operating results that come in significantly above projections.

A downgrade could follow if project cost overruns or scope changes create a significant financial burden that pressures rates and affordability. The agency also says sustained unfavorable financial operating results that weaken coverage or raise leverage beyond levels consistent with the current rating could lead to negative rating action.

In our earlier article on KBRA’s affirmation of Lansing’s general obligation unlimited tax bond rating, we outlined how the agency pointed to satisfactory reserves and liquidity, moderate debt levels, and the city’s role as Michigan’s state capital. We also noted that ongoing economic development supports the credit profile, while below-average wealth, elevated unemployment, high fixed costs, and limited revenue-raising flexibility remain key constraints. The report highlighted that Lansing’s dedicated UTGO tax levy structure helps underpin debt repayment capacity despite these pressures.

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