(Kansas City, Mo.) – Yesterday KC Water issued wastewater revenue bonds at a low interest rate of 3.01 percent, which will enable KC Water to perform $162.769 million in vital wastewater infrastructure improvements throughout Kansas City.
“KC Water continues to take advantage of low interest rates to fund vital infrastructure improvements,” said Mayor Sly James. “While many cities around the country are grappling with infrastructure challenges, I’m pleased with how KC Water is taking the lead and investing in Kansas City’s infrastructure, benefitting today’s customers and future generations.”
These bonds, which will be used to fund wastewater treatment, collection systems, and pump stations improvements, as well as projects related to the federally-mandated Overflow Control Program, were issued using $150 million in authority from the August 2012 election and included a net premium of $13.73 million. In addition to the funding for capital projects, the bonds will refinance $39.295 million of outstanding wastewater revenue debt, taking advantage of the current low interest rate environment. The refunding portion of the bond sale will help KC Water achieve debt service savings, on a present value basis, totaling over $4.9 million and just over 14.5 percent of refunding principal. The refunding bonds, with an interest cost of 2.38 percent, replaced bonds that had interest rates averaging near 4.53 percent. Standard & Poor’s affirmed its AA rating and Moody’s affirmed its Aa2 rating for the bond sale.
“KC Water is pleased to be able to take advantage of the ability to issue tax-exempt municipal bonds which results in lower borrowing costs and ultimately savings for our customers,” said KC Water Director Terry Leeds. “Our staff is committed to managing the Department’s resources effectively and efficiently and our bond ratings reflect that commitment.”
According to Standard & Poor’s, its AA rating means “the obligor’s capacity to meet its financial commitment on the obligation is very strong.” In its ratings rationale for the wastewater system, Standard & Poor’s noted KC Water’s “large service base that serves much of the Kansas City metropolitan statistical area” and “strong finances with historically strong debt service coverage and increased liquidity with timely rate increases.”
According to Moody’s Investors Service, obligations rated Aa2 “are judged to be of high quality and are subject to very low credit risk.” In its ratings rationale for the wastewater system, Moody’s noted that, “The Aa2 rating reflects the system’s strong asset life; large and diverse customer base and service area; and solid financial performance and debt service coverage which is supported by annual rate increases. The rating also incorporates strong management practices and adequate legal provisions for the bonds, yet also reflects the need for additional debt as the system works through a significant consent decree-driven capital program.”
KC Water continues to achieve savings through borrowing at low interest rates and timely refinancing:
- On November 4, 2011, $89.175 million in wastewater bonds were issued at 3.90 percent for a period of 25 years.
- On February 7, 2012, $47.725 million in water bonds were issued at 3.23 percent for a period of 25 years.
- On November 29, 2012, $78.65 million in wastewater bonds were issued at 2.74 percent for a period of 25 years.
- On February 27, 2013, $54 million in water bonds were issued at 3.14 percent for a period of 25 years.
- On May 8, 2014, $54.365 million in water bonds were issued at 3.24 percent for a period of 25 years.
- On April 9, 2015, $59.79 million in water bonds were issued at 3.25 percent for a period of 25 years.
The bonds were offered and sold through negotiated sale. The underwriting syndicate consisted of: Siebert Brandford Shank & Co., L.L.C., Jefferies, Loop Capital Markets and Valdes & Moreno, Inc.
FirstSouthwest and Moody Reid Financial Advisors served the City on the transaction as co-financial advisers. Gilmore & Bell, P.C. and the Martinez Law Firm, LLC served as co-bond counsel.
For additional financial information, please contact Tammy Queen, Acting City Treasurer in the Finance Department, at 816.513.1024 or tammy.queen@kcmo.org.
For additional KC Water information, please contact Kip Peterson, Communications Manager for KC Water, at 816.513.0280 or kip.peterson@kcmo.org.
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KC Water maintains and operates water treatment and distribution systems, stormwater management systems, and wastewater collection and treatment systems for residential and business customers in Kansas City and for wholesale customers in the Kansas City area. KC Water is primarily funded by fees charged to customers based on their use or impacts on the three utility systems.
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