Water Authority issues bonds to level debt service

by Sarah Fay Campbell

The Coweta County Water and Sewerage Authority has finally issued its series 2013 bonds.

The authority sold $13,350,000 of bonds on Tuesday, which is substantially less than the $30 million in bonds the authority had initially considered issuing and the $38 million that was validated in July. The bonds were 28-year bonds, not the 30-year bonds originally considered.

The bond issuance completely paid off - or 'defeased' - the bonds issued in 2001, and partially paid off the Series 2005 and 2007 bonds.

Bond rates have continued to move up over the past few months, and 'it didn't make sense' to do a larger issuance, said Jay Boren, authority CEO.

The smaller issuance did what the authority needed it to do - level the authority's bond service over the next several years. Without some changes, the annual debt payments would have jumped significantly in 2016. 'We feel comfortable with the levels that we are at now,' Boren said. 'We feel comfortable with where our aggregate debt is… it gives us a few more years for growth' to increase the authority's revenues. 'We feel confident the economy is turning around.'

Currently, the authority has a lot of water - and a lot of sewer capacity - and could use more water and sewer customers.

When the authority first started looking at a new bond issuance in 2012, plans were to completely pay off the 2001, 2005, and 2007 bonds, even out the debt service, and possibly realize as much as $2 million in savings.

But by the time things were ready to go last December, rates had started to go up, and the authority's advisors recommended waiting.

In June, when the numbers were run again, the savings totaled $391,000.

But rates kept moving and 'there are no savings' realized with the bond issuance, said Boren.

'Hindsight is 20/20,' Boren said. 'Last December, if we had gone to market, we would have achieved some savings.'

In July, the authority moved to do another bond validation, raising the maximum amount of the bonds from $30 million to $38 million, because of an opportunity to 'pursue a more favorable debt service structure,' CFO Andrew Caldwell said at the authority's July meeting.

Increases in basis points 'changed the path that we took,' Boren said.

'We were pretty aggressive with the interest rates,' Boren said. The underwriter, Tray Monroe with Merchant Capital, 'said if it had been a larger issuance … it would have been tough to sell at those aggressive rates. We would have had to offer more lucrative rates to sell more,' he said. 'The level we had it at was pretty much perfect' for the smaller issuance.

In addition to using the new bond proceeds to pay off the old bonds, the authority also used $4.8 million left from the 2010 bonds.

Paying off the 2001, 2005 and 2007 bonds would have taken Coweta County taxpayers off the hook. Bonds issued since then are backed by the authority, not Coweta County.

The pay-offs were $2,795,000 on the 2001 bonds, $4,970,000 on the 2005 bonds, and $7,272,000 on the 2007 bonds.

The authority still owes $17,995,000 on the 2005 bonds and $19,410,000 on the 2007 bonds.



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