Rain, other factors delay Corpus Christi's projected water supply emergency

Drought-stricken Corpus Christi moved the projected onset of a water supply emergency to December from September in the wake of rainfall and other factors, the Texas city announced on Tuesday.

The three-month respite from a potential Level 1 emergency ? indicating water supply is 180 days from not meeting demand ? comes as rating agencies are keeping a close eye on the city's efforts to prevent a crisis.

Beneficial rainfall that increased reservoir storage levels, as well as groundwater production from wells and a revised projection to November from August for when water from Lake Texana would be reduced, were cited by Nicholas Winkelmann, chief operating officer of Corpus Christi Water, as factors delaying an emergency.

"In the last week, the watersheds received about 0.5 to two inches (of rain)," he told the city council. "Our watersheds are looking [for] anywhere from two to five inches for the remainder of (this) week, so that's very good news."

Corpus Christi has $1 billion of projects aimed at producing 76 million gallons of water daily underway. Long-term projects being explored involve seawater desalination, which could be eligible for greater federal funding.

Texas Republican Congressman Michael Cloud announced on Thursday the Trump administration removed a $30 million federal funding cap for desalination projects.

"It is no secret that the Coastal Bend is in need of long-term water solutions, and this is the first step into making things like desalination a reality for the region,"he said in a statement.

During a March visit to Corpus Christi, President Donald Trump expressed support for allocating federal money to the city's inner harbor desalination project.

As for Corpus Christi's financial situation, a forecast presented to the city council on Tuesday showed an estimated $940,000 shortfall in the general fund budget for the fiscal year that begins Oct. 1.

"We're assuming that we will have water and our economy will continue to be stable," Amy Rodriguez, the city's management and budget director, said. "We are working on what the potential impacts of a (water) curtailment might be to the budget. That's not reflected here."

The city council postponed action on policies, including water allocations and surcharges, that would be put in place for a Level 1 emergency until next month. Corpus Christi Water, a city agency, is the primary water supplier for a seven-county region, which is experiencing stage three drought conditions that triggered water-use restrictions.

The looming water crisis has weighed on the city's bond ratings with S&P Global Ratings earlier this month downgrading the city's utility system revenue debt rating two notches to A and placing it on CreditWatch, indicating the potential for another downgrade over the next six months.

On Wednesday, S&P revised the outlook on the city's AA general obligation rating to negative from stable, saying there is "a one-in-three chance we could lower the rating over the next two years if we believe acute drought conditions and water supply pressures will cause financial performance to deteriorate or economic activity to contract."

Moody's Ratings, which downgraded Corpus Christi's GO rating to A1 from Aa2 and utility system rating to A1 from Aa3 in December, launched a review last month for another round of potential downgrades.

Fitch Rating has assigned negative outlooks to the city's AA issuer and AA-minus utility system ratings.