(Kansas City, Mo.) – Last week KC Water Services issued water revenue bonds at a low interest rate of 3.25 percent, which will enable KC Water Services to perform $65 million in vital water infrastructure improvements throughout Kansas City.
“KC Water Services continues to take advantage of low interest rates to fund vital water infrastructure improvement projects,” said Mayor Sly James. “I’m pleased with how KC Water Services is investing in the City’s infrastructure to make Kansas City best for today and for future generations.”
These bonds, which will be used to fund water main replacements as well as treatment and pump station improvements, were issued using $59.79 million in authority from the August 2014 election and included a net premium of $5.5 million. Standard & Poor’s affirmed its AA+ rating and Moody’s affirmed its Aa2 rating for the bond sale.
“KC Water Services 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 Services 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 reflects a “very strong capacity to meet financial commitments.” In its ratings rationale, Standard & Poor’s noted KC Water Services’ “large service base that serves much of the Kansas City metropolitan statistical area” and “strong financial performance.”
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 KC Water Services, Moody’s noted that, “Assignment and affirmation of the Aa2 rating reflects the system’s stable financial performance, which is the result of annual rate increases and prudent management practices, including the close monitoring of expenditures. The rating also includes a stable customer base and service area, an ample water supply and system capable of meeting current demand, as well as a manageable debt profile with plans for cash funding and debt issuances to meet capital improvements moving forward.”
“This water bond sale will play a key role in funding our data-driven Water Main Replacement Program,” added Leeds. “Through this program, our goal is to annually replace 28 miles of critical water main in areas of the city that are statistically proven to have water mains that are likely to fail. This proactive work means fewer water main breaks, meaning fewer frustrating service interruptions for customers. And, once replaced, these pipes should last for up to 100 years.”
KC Water Services continues to achieve savings through borrowing at low interest rates and timely refinancing. On November 4, 2011, $97 million in wastewater bonds were issued at 3.93 percent for a period of 25 years. On February 7, 2012, $52 million in water bonds were issued at 3.27 percent for a period of 25 years. On November 29, 2012, wastewater bonds were issued at 2.86 percent for a period of 25 years. On February 27, 2013, water bonds were issued at 3.14 percent for a period of 25 years. On May 8, 2014, water bonds were issued at 3.24 percent for a period of 25 years. This issue, which sold on April 9, 2015, was issued at 3.25 percent for a period of 25 years.
The bonds were sold at competitive sale with the winning bid submitted by Wells Fargo.
FirstSouthwest and Moody Reid Financial Advisors served the City on the transaction as co-financial advisers. Gilmore & Bell, P.C. and Martinez Madrigal & Machicao, LLC served as co-bond counsel.
For additional financial information, please contact Tammy Queen, City Treasurer in the Finance Department, at 816.513.1024 or tammy.queen@kcmo.org.
For additional KC Water Services information, please contact Kip Peterson, Communications Manager for Water Services, 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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