Rating Action: Moody's assigns Aa3 to Rockwood Water People's Utility District, OR's WIFIA loanGlobal Credit Research - 17 Feb 2022New York, February 17, 2022 -- Moody's Investors Service has assigned a Aa3 rating to Rockwood Water People's Utility District, OR's $30.4 million WIFIA Loan Agreement (WIFIA - N20168OR). Moody's maintains its Aa3 rating on the district's additional $18.6 million of outstanding parity lien water revenue bonds.RATINGS RATIONALEThe Aa3 rating reflects the district's healthy financial position supported by a strong series of rate increases in the Portland (Aaa stable) metropolitan area. The PUD's debt service coverage is currently very strong but will taper to more moderate levels as debt service increases as part of issuances related to its Groundwater Development Master Plan (GDMP). The district currently sources most of its water through a wholesale water contract with Portland Water Bureau (PWB), which runs through fiscal 2026. The GDMP details improvements to the district's groundwater supply system that would eliminate the need for maintaining the existing wholesale contract with PWB. The PUD's liquidity is strong and helps to offset the weakness of not having a debt service reserve funds supporting the obligations. The legal covenants of the loans are otherwise standard and include a 1.25 rate covenant and additional bonds test.RATING OUTLOOKOutlooks are not typically issued to credits with this level of debt outstanding.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING- Successful migration to own water supply from wholesale water purchases, while still maintaining strong financial metrics- Material increase in system size and customer base wealth measuresFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING- Increase in leverage above expectations- Decline in coverage below planning targets- Significant and sustained decline in liquidity- Unforeseen capital or operational delays related to implementation of GDMPLEGAL SECURITYThe district's obligations are secured by a priority lien on the water system's net revenue, on parity with the outstanding water revenue bonds.USE OF PROCEEDSLoan proceeds will be used for the design and construction of wells and reservoirs related to the PUD's GDMP.PROFILEThe district encompasses about 10 square miles of Multnomah County (Aaa stable) and serves approximately 66,000 residents across portions of the Cities of Portland, Gresham (Aa2) and Fairview. The district currently purchases the majority of its water supply from the Portland Water Bureau, which sources most of its water from the Bull Run Watershed. The enterprise maintains over 165 miles of pipeline, operates three production wells and manages four reservoirs, which provide 18.9 million gallons of storage.METHODOLOGYThe principal methodology used in this rating was US Municipal Utility Revenue Debt published in October 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1095545. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. 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