Fitch rates Milwaukee Sewer Dist 'AA+' --credits United Water

CHICAGO--(BUSINESS WIRE)--Dec. 9, 2003--Fitch Ratings assigned a 'AA+' rating to the Milwaukee Metropolitan Sewerage District, Wisconsin's approximately $32 million general obligation sewerage system refunding bonds negotiated on  t Dec. 11, 2003.

The 'AA+' rating for the Milwaukee Metropolitan Sewerage District (the district), reflects its large and diversified service area, growing tax base, efficient operating and management practices, and strong financial performance. The stable rating outlook reflects the district's continued ability to meet customer demand through ample system capacity and increased operating efficiency.

The district's tax-supported debt burden should remain stable for the next several years. Financially, the district consistently posts sound results as user charges remained flat in real terms and successfully achieved efficiency measures.

The district successfully achieved user and tax rate stability for its customers through strong cost control and consistent infrastructure investment. Operating efficiencies have limited operating expenditure growth, and property tax support remains dedicated to debt service and capital spending. Most of the efficiencies gained since 1998 accrued through a wastewater service contract with United Water Services Milwaukee LLC (UWS) for the operation of its wastewater treatment plants and related facilities.

The district estimated the contract would save 30% of its projected costs, or $140 million, over its 10-year term. These savings have been achieved at a slightly greater pace than projected through the first five years of the contract, allowing for an immediate reduction in user charges and the promotion of a stable rate environment for customers.

As a result, the district achieved consistently sound financial operations over the past several years. While the resolution of legal challenges to the district's capital charges produced a strong surplus in 1996, the district's financial performance on average was balanced in the succeeding six years. Reflecting the district's ability to control operating expenses, Fitch expects the district to post a modest operating surplus for the year ending Dec. 31, 2003.