Department of Finance
Reference: Water Treatment Plant Financing - Bond Ordinance
To: Mayor Gregory Mills and Members of City Council
Through: Michael P. Martinez, City Manager
Prepared By: Catrina Asher, Director of Finance
Date Prepared: January 21, 2025
PURPOSE
To request City Council acting as the Water Activity Enterprise approve a Bond Ordinance authorizing borrowing to finance the remainder of the Water Treatment Plant project.
BACKGROUND
Financing Review
The Water Treatment Plant (WTP) project is financed by a combination of ARPA Grant Funding, the issuance of $80M in bonds in 2022, fund reserves and other grants, and the proposed issuance of $85M in bonds in 2025.
2025 Bond Issuance
The project is currently underway and is ahead of schedule with completion planned for early 2027. At this time, the current bond fund (proceeds from the 2022 borrowing, plus interest earned) is expected to be fully utilized in Q1 2025. Therefore, staff began the process for the second borrowing so that funds will be received in Q1 2025.
The second borrowing will be $85M and is targeted to close in February 2025. The proposed timeline is as follows:
• December 17, 2024 City Council Meeting - Reimbursement Resolution
• January 14, 2025 Study Session - Project financing overview
• January 21, 2025 City Council Meeting - Bond Ordinance (Initial)
• Week of January 27, 2025 - Rating Agency calls
• February 4, 2025 City Council Meeting - Bond Ordinance (Final)
• February 19, 2025 - Competitive Bond Sale
• February 27, 2025 - Bond Closing & Receipt of Funds
City Council approved the reimbursement resolution on December 17th, 2024.
Staff proposes the Bond Ordinance attached, with final reading on February 4th. The ordinance will do the following:
• Authorize staff to proceed with the borrowing through a competitive public sale.
• Pledges the revenues of the Water Activity Enterprise as payment for the debt.
• Set maximum terms for the borrowing, including a maximum amount, interest rate, and term.
If City Council approves the ordinance, staff will proceed with the bonding process, including ratings calls, issuance of the preliminary official statement holding the competitive bond sale, and closing the transaction.
CRITERIA BY WHICH COUNCIL MUST CONSIDER THE ITEM
This financing has been contemplated since the beginning of the project and estimated debt service has been factored into financial models since that time. The financing is necessary for completion of the WTP project underway.
FINANCIAL IMPACT
The future borrowing and related debt service has been factored into the City’s multiyear plans for the Water Fund since the project broke ground in 2022 and have been factored into rate projections. The user rates for 2025 were proposed with this financing in mind. Those rates have already been approved and staff is not requesting any changes to those rates at this time.
Attachments:
Ø Ordinance
Ø Presentation