Standard and Poor’s recently increased the Andalusia Utility Board’s credit rating from BBB+ to A-, and listed the outlook as stable.

Standard and Poor’s is one of several credit rating agencies recognized by recognized by the U.S. Securities and Exchange Commission.

The board’s previous rating of BBB+ meant S&P believed it to have adequate capacity to meet its financial commitments, but more susceptible to adverse economic conditions or changing circumstances than organizations of higher credit ratings.

The current A- rating means it is less susceptible to changes in circumstances, and has a strong capacity to meet its financial commitments.

Mayor Earl Johnson said the board had to get its rates where they needed to be to take care of system maintenance before the rating could be improved.

“In too many systems, they do the opposite of that,” he said. “They keep the rates low, don’t do maintenance on the system, and then are not in a financial position to address problems when they arise.”

The S&P report cited management’s ability to maintain and improve the integrity of the board’s assets as a basis for the improved rating.

“During the review process it became very evident that Standard and Poor’s was interested in learning about our rate structure and how it relates to our maintenance program and future capital projects,” Johnson said.

“The financial condition of a utility system is much more than what the various financial reports reflect, which incidentally, are very good. The age, capacities, and maintenance of various systems as well as constant evaluation of those systems to identity weaknesses and future capital projects to address potential problem areas, regulatory compliance records, all affect the board’s finances.”

The mayor also commended Merchant Capital for their assistance preparing for the review.

“Ken Funderburk at Merchant Capital was instrumental in giving us the financial expertise that we needed to insure that we were prepared for the review. Merchant Capital has been an instrumental component of the development of Andalusia over the years and we certainly appreciate their professionalism and abilities.”

Ratings from Standard and Poor’s are used to assess the financial condition of various entities and have a direct impact on capital costs, such as interest rates, insurance and issuance fees. The better or higher the rating, the lower the fees and charges associated with capital procurement.