Water Debt

Water Debt Obligations

The water system is suffering from an extreme lack of financial flexibility. Currently the City's water fund has two bond issuances and one loan. The total payments for debt in the Water Fund are nearly $1,000,000 annually and represent 22% of all expenditures this budget year.  In 2019 one of the bond issuances will be retired.  This will reduce the overall annual debt payments to $800,000, but debt payments will still represent 18% of all water expenditures.   

Figure 1, below, shows the City’s outstanding debt obligations, a 1998 bond, a 2003 bond, and a 2009 loan.

 


water Debt Graph 1

Figure 2, below, shows the City’s near term bond obligations.  The 1998 bond will be retired in 2019, lowering the debt burden on the water utility.  The City will have little flexibility due to the terms of the 2003 Bond.

water debt graph 2


The most challenging aspect of water debt is a water bond, issued in 2003, for $6.75 million. The structure of this bond was to be paid over 30 years, at 5%, with “interest only” payments from 2003-2019. This means the principal is not scheduled to receive a payment until 2019. Currently ratepayers have spent $4 million on interest for this bond.  In 2034, when the bond is retired, total interest paid will be approximately $8.2 million.

Figure 3, below, shows the repayment schedule for the 2003 Bond.

Water Revenue Bond v 2.0

At Council’s direction, City staff is working to refinance this bond issuance with the goal of lowering the interest rate, reducing the annual cost, and/or paying down the principal in a shorter number of years. If we are able to find a more favorable structure for our debt, a plan will come to Council for consideration in fall of this year.