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Hurricane Ian: Most Municipal Utility Ratings, Bolstered By Significant Liquidity, Are Expected To Be Unaffected

Initial Assessment Is That No Material Rating Impact Is Likely

S&P Global Ratings rates approximately 70 utility credits in Florida, 31 of which have been affected by Hurricane Ian with main breaks, power outages, and system reliability issues including lack of water and boil notices. As the deadly storm progresses, we will continue to monitor potential impacts in Georgia and the Carolinas.

Since the rebuild and recovery in the hardest hit areas could take months, and some communities may be displaced, substantial liquidity will be necessary to cushion reduced collections and to bridge the period until Federal Emergency Management Agency (FEMA) loans are available. Given the robust liquidity available and sophisticated emergency response, which is assessed in our Operational Management Assessment (OMA), we do not believe near-term rating impact is likely. Our OMA assessment considers the breadth of each credit's resiliency planning, particularly those in coastal or low-lying areas, including whether the utility has prioritized its assets under a range of climate scenarios, and identified or completed potential adaptive measures, such as sea wall construction, pump station hardening, manhole rehabilitation, energy redundancy, and other flood mitigation decisions.

Based on the most recent data available (see table), most of the utilities within the affected portfolio have significant liquidity and prudent OMAs, which includes emergency preparation and response. None of the credits within the affected area have vulnerable OMA scores or cash positions below five months of operations. The average water/sewer credit in Florida maintains more than 700 days of cash on hand, driven by a recognition that the region has heightened exposure to storm-related risks.

Utility damage from storm surge, wind, and flooding is expected to be significant

President Joe Biden declared a major disaster in Florida, providing federal aid to supplement state and local recovery efforts. We expect utilities to rely primarily on FEMA as well as other water infrastructure aid programs, through the Department of Agriculture and the Environmental Protection Agency (EPA).

Short-term drinking water contamination:  Hurricanes can damage water and sewer lines, or flood treatment facilities and storage facilities, increasing risk of water contamination. Past storms suggest that safe drinking water can become a major concern. Hurricane Harvey, for example, caused substantial water quality concerns to southwest Louisiana and southeast Texas when floodwater contaminated reservoirs. Following Hurricane Sandy, nearly 700 wastewater and drinking water utilities in Washington, D.C., and 11 states were damaged. Sewage treatment can be slower to recover given that it is sometimes under the deepest water given the location of many facilities, which are at low points of the area to take advantage of gravity.

Typically, operations resume within days or weeks, though early reports suggest some areas may take months to fully recover. Several Florida utilities were without water and have since resumed service--albeit under multi-day boil notices. EPA reported that following Hurricane Rita more than 85% of drinking water and 95% of wastewater treatment facilities in the region were operational within two weeks. However, those with infrastructure deficiencies may take longer to recover.

Customer Displacement Can Affect Revenue Collections

Given the nature of the flooding, there is risk that some systems may not be fully utilized as many citizens will be displaced and potentially unable to return for an extended period. We expect this will be the case for Fort Myers, given the magnitude of damage. FEMA is reporting thousands will likely be displaced for multiple months or longer. This can influence collections, reducing revenues available to repair systems, as demonstrated by the example below. Further, given construction cost inflation, as well as supply chain and labor challenges, rebuild could be more challenging than it has been historically. For smaller utilities or those with limited liquidity, this can be an even greater risk. Given the prevalence and magnitude of storms in recent years, insurance premiums have increased over time, with this trend expected to continue. Over the long term, this could influence rebuild, which could affect the rate base available to support debt. We believe this risk depends on the level of commerce and overall health and desirability of the service area economy.

Florida Utilities In Hurricane Ian's Path
Name Rating Cash (mil. $) Days cash Operational Management Assessment (1=strong) Asset adequacy Organizational effectiveness Rate-setting

Leesburg*

AA-/Stable 37.4 736 2 Strong Standard Good

Fort Pierce Utilities Authority

A/Stable 20.8 90 3 Standard Good Good

Clearwater Stormwater*

AA/Stable 46.5 2,471 4 Standard Standard Good

Florida Keys Authority

A+/Stable 48.3 356 3 Good Standard Good

Pinellas County*

AA+/Stable 56.4 447 1 Strong Strong Strong

Brevard County

AA/Stable 57.3 865 2 Good Good Strong

Broward County

AA+/Stable 31.5 144 2 Good Strong Good

Cape Coral*

A+/Stable 61.0 415 3 Good Good Good

Clearwater Water & Sewer*

AA+/Stable 160.8 1,007 2 Good Strong Strong

Florida Govt'l Util Auth (Lehigh Util Sys)*

A+/Stable 20.9 1,007 2 Strong Good Good

Hillsborough County*

AA+/Stable 611.5 1,105 2 Good Strong Strong

JEA

AA+/Stable 75.7 130 3 Strong Standard Standard

Miami Dade County

AA-/Stable 133.2 102 3 Good Good Good

Oviedo*

AA/Stable 18.9 541 2 Good Good Strong

Palm Bay

AA-/Stable 18.4 214 2 Good Strong Good

Palm Beach County

AAA/Stable 330.9 892 2 Strong Strong Good

Pasco County*

AA+/Stable 222.4 837 3 Standard Standard Strong

Seacoast Utility Authority

AA+/Stable 78.9 955 2 Strong Good Good

Tallahassee

AA/Stable 39.9 147 2 Good Strong Strong

Auburndale*

A+/Stable 11.0 395 2 Good Standard Strong

Cocoa

AA/Stable 57.2 462 1 Strong Good Strong

Crestview

A+/Stable 3.0 191 4 Standard Standard Good

Davie

AA/Stable 66.6 1,712 2 Good Good Strong

Fort Lauderdale

AA+/Stable 92.1 330 1 Strong Strong Strong

Hernando County*

AA-/Stable 57.5 948 2 Good Standard Strong

Oakland Pk

AA/Stable 11.8 262 1 Strong Good Strong

Seminole County*

AA+/Stable 95.0 1,067 2 Good Good Strong

St Augustine

AA-/Stable 21.3 522 2 Good Strong Strong

St Johns County

AAA/Stable 111.2 1,274 2 Good Strong Strong

Tampa Water & Sewer*

AAA/Stable 348.4 869 1 Strong Strong Strong

Winter Park*

AA-/Stable 9.9 155 4 Standard Standard Standard

Winter Springs*

AA-/Stable 30.6 1,573 3 Good Good Good

Charlotte County Utility System*

AA-/Stable 44.8 311 2 Good Good Strong

Deltona (Florida Water Services)

A+/Stable 32.7 1,201 3 Standard Good Good

Emerald Coast Utility Authority

A/Stable 32.1 195 4 Standard Standard Good

Fort Myers*

A+/Stable 55.1 433 2 Good Standard Strong

Martin County

AA/Stable 38.6 718 2 Good Good Strong

Palm Coast

AA-/Stable 22.7 312 2 Good Strong Good

Polk County Utilities*

AA+/Stable 77.3 602 2 Good Strong Good

Sarasota County*

AA+/Stable 189.8 819 2 Good Strong Good

Tohopekaliga Water Authority*

AAA/Stable 127.6 577 2 Good Strong Strong

West Palm Beach

AA+/Stable 115.9 501 1 Strong Strong Strong

Winter Haven*

AA-/Stable 24.6 303 4 Standard Standard Good

North Miami Beach Water

A+/Stable 17.8 279 3 Good Good Good

Miami Beach (water/sewer)

AA-/Positive 81.3 479 2 Good Strong Strong

Lee County*

AA+/Stable 120.3 640 2 Good Good Strong

North Sumter County Utility Dependent District - NSU Fund

AA-/Stable 46.1 2,637 3 Good Standard Good

Bay Laurel Center Community Development District

A+/Stable 6.3 348 2 Good Standard Strong

Polk City*

A/Stable 3.3 967 3 Good Standard Good

Miami Beach (stormwater)

AA-/Stable 55.1 1,648 4 Vulnerable Good Good

Dunedin*

AA-/Stable 20.7 550 2 Good Standard Strong
Dunedin (stormwater)* AA/Stable 6.1 757 3 Standard Standard Strong

Daytona Beach

A+/Stable 36.7 338 3 Good Standard Good

Orlando*

AAA/Stable 143.3 617 1 Strong Strong Strong

Venice*

AA/Positive 35.3 829 2 Good Strong Good

Tarpon Springs*

AA-/Stable 11.0 350 4 Standard Standard Standard

Fernandina Beach

AA-/Stable 15.8 1,225 3 Good Standard Good

St. Lucie County Water and Sewer District

A+/Stable 10.7 503 3 Standard Good Good

Riviera Beach (Riviera Beach Util Special District)

A+/Stable 46.5 529 3 Standard Vulnerable Strong

Holley-Navarre Water Sys Inc

A+/Stable 11.7 343 4 Good Standard Standard

Village Ctr Comnty Dev District (LSSA fund)

A+/Stable 22.6 2,170 5 Standard Vulnerable Standard

Village Ctr Comnty Dev District (VCSA fund)

A+/Stable 17.5 1,749 5 Standard Vulnerable Standard

Port St Lucie

AA/Stable 79.2 690 2 Good Strong Strong

Riviera Beach (stormwater)

A+/Stable 4.0 669 3 Good Good Standard

Orange County*

AAA/Stable 148.5 341 1 Strong Strong Strong

City of Ocoee*

AA+/Stable 23.0 791 2 Good Good Strong

Lynn Haven

AA-/Negative 5.8 348 4 Good Standard Good

Miramar

AAA/Stable 81.5 728 2 Good Strong Strong

North Sumter Utility Dependent District (Central Sumter Utility)

A/Stable 3.0 422 3 Good Good Good

Miami-Dade County (Stormwater)

AA+/Stable 44.7 7,934 3 Good Good Good

Wildwood Utility Dependent District

BBB+/Positive 20.9 1,229 3 Good Good Good

Immokalee Water & Sewer District*

A+/Stable 12.3 587 3 Good Good Good
* Within hurricane or mandatory evacuation zones. Reflects most current audited fiscal year.

This report does not constitute a rating action.

Primary Credit Analyst:Jenny Poree, San Francisco + 1 (415) 371 5044;
jenny.poree@spglobal.com
Secondary Contacts:Chloe S Weil, San Francisco + 1 (415) 371 5026;
chloe.weil@spglobal.com
John Schulz, Centennial + 1 (303) 721 4385;
john.schulz@spglobal.com

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