Lansing (Metropolis of) MI Sewer Enterprise — Moody’s affirms Lansing, MI’s A1 senior lien sewer revenue ranking; outlook is negative
Rating Action: Moody’s affirms Lansing, MI’s A1 senior lien sewer revenue rating; outlook is negativeGlobal Credit Research – 26 Mar 2021New York, March 26, 2021 — Moody’s Investors Service has affirmed the A1 rating on the City of Lansing, MI’s senior lien sewer revenue debt. The outlook is negative. The A1 rating and negative outlook affects $12.5 million of outstanding senior lien sewer revenue bonds.RATINGS RATIONALEThe A1 rating reflects the sewer system’s ample liquidity, adequate debt service coverage on total system debt, independent rate-setting authority, and limited exposure to the city’s unfunded pension and other post-employment benefit (OPEB) liabilities. The debt ratio should remain moderate despite ongoing capital needs. These attributes are balanced against a weak socioeconomic profile of the customer base, as well as a relatively weak sum sufficient rate covenant on senior lien sewer revenue debt.RATING OUTLOOKThe negative outlook reflects the outlook on the City of Lansing’s (A2 negative) issuer and general obligation limited tax (GOLT) ratings. As an enterprise of the City of Lansing, the city owns, operates, and manages the utility, so negative movement in the city’s credit quality could lead to downward rating movement for the utility.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING- Significant expansion of the system’s customer base and strengthening of resident income metrics- Substantial and sustained increases in debt service coverage on total system debt- Moderation of the sewer utility’s debt ratio- Removal of the negative outlook, or an upgrade, on the City of Lansing’s issuer and GOLT ratingsFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING- Contraction of the customer base or weakening of resident income metrics- Weakened debt service coverage on total system debt- Significantly reduced system liquidity- Increases to the sewer utility’s debt ratio- Downgrade of the City of Lansing’s issuer and GOLT ratingsLEGAL SECURITYDebt service on the outstanding rated sewer revenue debt is secured by a statutory first lien on net revenues of the city’s sewage disposal system.PROFILEThe sewer enterprise system is a city-owned and operated utility that provides collection and treatment of wastewater for the City of Lansing and portions of three surrounding townships. As of fiscal 2020 the system provided service to approximately 41,200 customers in an area with an estimated 114,000 residents.METHODOLOGYThe principal methodology used in this rating was US Municipal Utility Revenue Debt published in October 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1095545. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. 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