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• Management quality and practices, <br />• Non-fmancial system characteristics, <br />• Size of the customer base and other customer characteristics, and <br />• Local economic vigor and other community characteristics. <br />One of the leading credit rating agencies, Fitch IBCA, maintains the following detailed <br />wastewater utility bond credit-worthiness checklist: <br />Fitch's "10 Cs" of Water/Sewer Bond Analysis <br />Community Characteristics <br />^ Economic diversity. <br />^ Income and property wealth levels. <br />^ Population growth. <br />^ Potential for residential, commercial, or industrial sector volatility, including <br />customer concentration. <br />^ Typically a key determinant for rating placement in the `A', `AA', or `AAA' <br />categories. <br />Customer Base <br />^ Stability, growth or decline? <br />^ Effect on the capital program, rates, and fmancial flexibility. <br />^ Operating reliance on growth-sensitive fees derived from customer base growth. <br />• Capacity <br />^ Water supply sources. <br />^ Treatment facilities. <br />^ Collection, transmission, and distribution infrastructure. <br />Management, technological, and personnel capacity. <br />^ Regional demands on water supplies. <br />• Compliance with Environmental Laws and Regulations <br />} Is the utility staying ahead, keeping up, or falling behind regulatory mandates? <br />Status of consent decrees or compliance litigation. <br />^ What developing regulations could affect the utility? <br />How much will meeting the regulations cost in the five- to ten-year timeframe? <br />f--~ • Capital Demands and Debt Policies <br />^ Costs of growth, regulations, and maintenance. <br />~ '' Impact of costs on rates. <br />Cost effects on financial flexibility. <br />^ Pay-as-you-go versus debt funding sources. <br />'' • Coverage and Financial Performance <br />^ Goals for annual fmancial performance. <br />Reasonableness of future budget assumptions. <br />^ Payment enforcement and account delinquencies. <br />^ Cause of past fmancial volatility, if any. <br />^ Policies to limit transfers to general fund are preferable. <br />• Cash and Balance Sheet Considerations <br />^ The less stable the operating environment, the larger the needed fmancial cushion. <br />^ Operating reserve levels. <br />_ , 2005 MWMC Financial Plan - Appendix I Page 21 <br />