(Kansas City, Mo.) – Last week KC Water issued wastewater revenue bonds at a low interest rate of 3.40 percent, which will enable KC Water to perform $180.227 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 City Manager Troy Schulte. “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.”
The Series 2018A 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 $165 million in authority from the August 2012 election and included a net premium of $16.343 million. In addition to the funding for capital projects, the Series 2018B bonds will refinance $53.105 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 $5.6 million and just over 13.33 percent of refunding principal. The refunding bonds, with an interest cost of 3.40 percent, replaced bonds that had interest rates averaging near 5.11 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 and stable outlook reflects “our expectation that the system will continue to produce strong debt service coverage and maintain sufficient liquidity through successful implementation of timely sewer rate increases while handling its upcoming capital needs, which include the city’s overflow control plan.”
According to Moody’s Investors Service, its Aa2 rating and stable outlook reflects that “the enterprise continues to complete projects on time and on budget in order to comply with a consent decree while maintaining healthy debt service coverage. We expect the enterprise’s tenured management team will maintain healthy financial metrics going forward, despite significant future borrowing plans.”
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.
- On January 27, 2016, $183.74 million in wastewater bonds were issued at 3.01 percent for a period of 25 years.
- On February 7, 2017, $78.13 million in water bonds were issued at 3.30 percent for a period of 25 years.
The bonds were offered and sold through negotiated sale. The underwriting syndicate consisted of: Morgan Stanley, George K. Baum & Company, UMB Bank, N.A., Jefferies, and Valdes & Moreno, Inc.
Hilltop Securities, 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 Doug Buehler, City Treasurer in the Finance Department, at 816.513.1024 or firstname.lastname@example.org.
For additional KC Water information, please contact Kip Peterson, Communications Manager for KC Water, at 816.513.0280 or email@example.com.
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.