Great Lakes Water Authority: Revenue Risk Assessment
Analyzing the Sewage Disposal System Revenue and Revenue Refunding Bonds, Series 2025 through comprehensive municipal intelligence.
Bond Overview
GLWA's Series 2025 bonds are payable solely from Net Revenues of the Sewer System—revenues remaining after Operation and Maintenance Expenses. Any factor affecting GLWA's ability to generate sufficient revenues or manage operational costs directly influences bond performance and security.
Strong underlying metrics: FY2024 debt service coverage ratios were 2.06x for Senior lien bonds, 1.54x for combined Senior and Second lien, and 1.24x across all bonds—exceeding required thresholds.
Revenue Generation and Customer Affordability
Financial Strength (Opportunity)
As of November 2024, GLWA held $152.8 million in cash and investments with a clean, unmodified audit opinion from Baker Tilly US, LLP.
Customer Arrears Challenge (Risk)
Despite affordability programs, customer arrears persist. 8,136 Lifeline participants entered with over $1 million in arrears, and the Lifeline program has exhausted its funding.
Revenue Underperformance
DWSD's drainage revenue was under budget by 3% for the month and 4.3% year-to-date, indicating potential pressure on Net Revenues.
Operational Efficiency Analysis
Municipal meeting intelligence reveals both efficiency gains and concerning operational issues. DWSD's drone-based inspection initiative saved $4 million within months, reducing data analysis time from nine months to 48 hours.
However, operational concerns persist: Only three of 15 JEDER trucks are active while external contractors may be filling the gap—raising questions about efficiency and elevated O&M expenses. DWSD was responsible for 5 of 29 gas line strikes, with 151 unresolved claims from a Southwest Detroit rupture.
Infrastructure Investment Strategy
GLWA is strategically reducing dependency on bonds by prioritizing cash and low-interest SRF loans. DWSD is pursuing a $20 million SRF loan for sewer rehab in North Corktown and Hubbard Farm, with potential for principal forgiveness due to Detroit's overburdened status.
“External funding success: DWSD secured $9 million from CDBG Disaster Recovery Funds and is pursuing $175 million from HUD to repair 13,000 alley sinkholes—alleviating pressure on Net Revenues.”
— Municipal Infrastructure Analysis
Risk Assessment Conclusion
GLWA's Series 2025 Bonds benefit from solid underlying financials, disciplined capital strategy, and favorable external funding pursuits. The authority maintains strong debt service coverage and substantial cash reserves.
Key monitoring areas: Customer arrears, aging infrastructure in Corktown, operational incidents, and regulatory compliance costs represent material risks to Net Revenues—the sole repayment source.
Key Metrics & Risks
2.06x Senior lien debt service coverage
$152.8M cash and investments
$4M saved through drone inspections
Customer arrears over $1M
Drainage revenue 4.3% under budget
151 unresolved rupture claims
Revenue Sources
Primary: Sewer System Net Revenues
Coverage: 1.24x all bonds combined
Strategy: Reduce bond dependency
Funding: Cash, SRF loans preferred
Regulatory Factors
NPDES: $18M 5-year mandate
Environmental: PFAS emerging risk
Cybersecurity: New requirements
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