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In another blow to the embattled water agency, Moody’s Investors Service has placed Central Basin Municipal Water District’s debt, its Aa3 Certificates of Participation, under review for possible downgrade.
The review comes one week after HMG-CN Publisher Brian Hews published a scathing Op/Ed, citing mismanagement and a dysfunctional board as reasons that CB should be taken over by LA County.
The District’s Certificates of Participation, Series 2010A, and Adjustable Rate Refunding Certificates of Participation, Series 2008B, amount to $48.4 million in total debt outstanding.
The certificates are secured by a senior lien on CB’s net water revenue.
Moody’s cited several reasons for the review and possible downgrade including low debt service coverage levels; changes in management and consequent differences in previously discussed outlook and long range plans; and lack of information regarding future year financial projections.
Moody’s is waiting for additional data from City management that is currently in process and will be available shortly.
If the requested information is not received, “Moody’s will take appropriate rating action, which could include the withdrawal or change of the Aa3 rating.”
In September 2014 Moody’s upgraded its rating for CB to a “stable outlook,” signaling the district was improving financially.
The new rating was given to the district’s proposed $8.5 million bond refinancing issue.
“The stable outlook relates to the litigation settlement with one of the district’s primary customers and the expectation that the district will restore debt service coverage and cash reserves to historic levels,” said a written release from Moody’s.
CB GM Tony Perez was instrumental in the turn around and improved rating of CB.
Inexplicably, days after the new rating, CB President Bob Apodaca and Directors Leticia Vasquez and James Roybal voted to fire Perez.
The firing was allegedly ordered by Pacifica Service’s influential President Ernie Camacho.
Camacho had stated that he intended to see Perez fired for his role in exposing the $5 million in no-bid contracts Pacifica received from CB between 2008-2012.
Those contract extensions have been extensively reported in this paper.
Camacho has also contributed thousands to Apodaca, Vasquez and Roybal’s campaign coffers.
CB General Manager Kevin Hunt told HMG-CN, “Central Basin works closely with Moody’s officials throughout the year and we have, in our budgetary planning, been guided by the debt coverage metrics that are critical to public and investor confidence. Beyond the numbers, Central Basin has recently been successful in implementing a strategic plan, reducing legal expenses and caseload, improving relations with our purveyor community and receiving award from the Government Finance Officers Association for the quality of our financial statements. We look forward every year to objective review of our improving status as a public entity.”
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