"As in the past, we expect our ratings on this sector to remain very high and stable," says Standard & Poor's credit analyst James Breeding. "All but three of the state revolving fund (SRF) programs we rate have 'AAA' ratings, and the remaining three are 'AA' or higher."

Standard & Poor's rates revolving fund bonds in 27 states that represent about $30 billion in outstanding debt. If you work in the water or sewer sectors, you know the SRF program loans to local entities or buys bonds local entities issue to support projects that state agencies (typically a Department of Health or a Department of Environmental Protection) have approved.

They're not the only source of capital that water and wastewater utilities need to implement major upgrades or new construction. Many also use vendor financing, energy performance contracting, and/or institute new fees. But the programs do help nearly 6,000 communities that include the New York City Municipal Water Finance Authority, which is the largest participant.

In U.S. Clean And Drinking Water State Revolving Fund Programs Maintain Exceptionally Strong Credit Quality, Standard & Poor's lists the bonds' fundamental credit strengths:

  • robust financial policies and practices
  • exceptionally low borrower payment delinquencies or defaults
  • maintenance of either significant reserves or high annual coverage of bond debt service

Amendments to the Clean Water Act established the clean water program in 1987 and the drinking water program in 1996. The U.S. EPA oversees state-level management of both.