Page 57 - Yucaipa Valley Water District

Workshop Memorandum No. 17-015 Page 2 of 4

Fitch Affirms Yucaipa Valley Water District, CA's
Water Revs at 'AA-'; Outlook Stable

25 Jan 2017 11:56 AM EST

Fitch Ratings-Austin-25 January 2017: Fitch Ratings has affirmed its 'AA-' rating on the
following bonds issued by the Yucaipa Valley Water District, CA (the district):

--Approximately $30.8 million water system revenue refunding bonds, series 2015A.

The Rating Outlook is Stable.

SECURITY

The bonds are secured by a first lien pledge on the revenues of the district's water system
(the system) and a 1% ad valorem property tax levied by the district.

KEY RATING DRIVERS

IMPROVING FINANCIAL PROFILE: Despite a year-over-year decrease in water sales
revenue driven by drought restrictions, in fiscal 2016, an increase in connection fees
combined with reduced debt service carrying costs led to an improvement in the system's
all-in debt service coverage (DSC) to 2.5x. Continued favorable financial results are
expected.

ELEVATED DEBT METRICS TO IMPROVE: While currently somewhat elevated, the district's
debt profile should improve due to an expected pay-go capital improvement plan (CIP)
along with rapid debt amortization.

WATER SUPPLY: Extensive planning by a proactive management team has resulted in a
sufficient and diverse water supply for medium- to long-term needs.

SOLID LOCAL ECONOMY: Unemployment and wealth metrics are sound albeit a bit below
average. Growth in connections is up, having recovered from recessionary lows.

RATING SENSTIVITIES

WEAKENED PERFORMANCE: The rating on Yucaipa Valley Water District's revenue bonds
could come under pressure if a deterioration in the district's financial and/or debt profiles
were to occur.

CREDIT PROFILE

The district is located 70 miles east of Los Angeles in the foothills of the San Bernardino
Mountains, with portions of the service area encompassing Riverside and San Bernardino

Yucaipa Valley Water District - January 31, 2017 - Page 56 of 68