OREANDA-NEWS. S&P Global Ratings assigned its 'A-' rating to the Millcreek-Richland Joint Authority, Pa.'s series 2016 guaranteed sewer revenue bonds. The outlook is stable.

The authority's receipts and revenue, as well as the GO pledges of Millcreek Township and Richland Borough, secure the bonds. Under the terms of the guaranty agreements, the borough and the township have each covenanted that should the authority at any time fail to pay the full amount of all principal and interest on the 2016 bonds when due, the borough and the township will promptly pay an amount sufficient in the aggregate to cure such deficiency. In the agreement, Richland has guaranteed the full and prompt payment of up to 30% of debt service and Millcreek has guaranteed up to 70%.

We currently view the weaker of the credit qualities of the GO pledges as equal to that of the authority. We understand the 2016 series will be used to currently refund the authority's series 2014 guaranteed sewer revenue bonds for present value savings. There is no extension of maturity.

"Credit factors supporting this view include the area' adequate management conditions and budgetary performance," said S&P Global Ratings credit analyst Christina Marin, "and its very strong-to-very strong budgetary flexibility and liquidity." Other factors include its: Weak economies, with adequate-to-strong property wealth and adequate incomes; Very weak debt and contingent liability position in Richland with debt service carrying charges at 6.7% of expenditures and net direct debt at 148.4% of total governmental fund revenue; butStrong debt profile in Millcreek, which has total governmental fund debt service at 3.8% of total governmental fund expenditures and net direct debt at 110.4%; andStrong institutional framework score. The authority is empowered to acquire, hold, construct, improve, maintain, operate, and lease sewer systems and sewage treatment works serving Richland Borough and Millcreek Township. Its revenues are generated from the rates imposed on its customers, who are all within these two municipalities. The system serves an estimated population of 5,794, in a mostly rural farming community in Lebanon County, about 25 miles from Harrisburg. The district provides wastewater services to residents in Millcreek Township and Richland Borough.

"The stable outlook on the rating reflects our opinion of the credit conditions of the member communities, which we believe translates into a reliable revenue stream to cover debt service," added Ms. Marin. The outlook further reflects the communities' adequate-to-strong economic indicators and adequate budgetary performance, supporting very strong liquidity and flexibility, albeit with low fund balance levels nominally. We also consider the authority's adequate coverage levels, consistent financial performance, and affordable rates as stabilizing factors. As such, we are unlikely to change the rating in our two-year outlook horizon.

We could raise the rating if debt service c substantially increases, or if both member communities see an improvement in budgetary performance, thus contributing to the strengthening of reserves and liquidity to levels that are in line with peers at a higher rating. Conversely, we could lower the rating if budgetary performance deteriorates in the member communities, forcing them to draw down on reserves, which we already view as low, to levels in line with peers at a lower rating, or should the authority's overall credit profile (including coverage rates and budgetary performance) weaken.