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Published Thursday, November 05, 2009 in Local

Coweta water board looks to increase capital

By Sarah Fay Campbell

The Times-Herald

The Coweta County Water and Sewerage Authority was presented with various options for reducing debt service and increasing funding for capital improvements at the November meeting Tuesday.

The authority issued $27 million in bonds in 2007 for various projects, including the county-wide replacement of faulty polybutylene pipe with copper.

The polybutylene replacement is approximately two-thirds complete, said General Manager Ellis Cadenhead at Wednesday's meeting.

But the project has already cost $2 million more than the authority originally budgeted.

As it turns out, there is a lot more faulty pipe than anticipated. And for the most part, no one is aware of the bad pipe until a problem arises.

Some of the bad "corp stops," which are where the water line attaches to the meter, had been patched previously with black polyethylene.

The authority filed a suit last year against Shell Oil, which manufactured the resin used in the bad pipe. The suit is still in the discovery phase, Cadenhead said.

"We're trying to get the best estimate for our attorneys," Cadenhead said. "We've spent about $2 million over what we have budgeted for it in the bond issues already." That cost only includes materials and what has been paid to contractors. It doesn't include work done by water authority employees, Cadenhead said.

Larry Kidwell and Tony King of Kidwell and Company presented the authority with three different options for taking advantage of the current low interest rates and low construction costs.

The authority currently has bonded indebtedness of $117,395,000.

That number includes the $27 million bond issuance from 2007 and a $29 million bond issuance from 2005.

The bonds have various maturity dates.

"We have attempted to determine if there is any way we can help you reduce your debt service by taking advantage of the low rates," said King.

The authority gets to take advantage of Coweta County's AA bond rating. That good credit rating, "the strength of the debt service coverage" and liquidity "are all major factors that contribute to what would be your future flexibility," Kidwell said.

"In a long-term financial plan, flexibility translates into strength," Kidwell said. "We would recommend that every move not only be made with a view to the present, but also with a view to what flexibility you may need in the future." The three options included an additional $10 million for capital projects and no changes to the existing debt.

Option one wouldn't change the existing debt, but it would provide interest-only payments for 16 years. The average debt service will be $6.4 million until 2027. The highest debt service will be $7.34 million.

"You would be paying approximately half a million more per year with this option and financing $10 million in new capital improvements," Kidwell said.

Option two would refund the bonds from 2001 and all subordinate debt. The average annual debt service will be $6.6 million; it will peak at $7.3 million in 2006. "This does provide lower annual average debt service than option one," Kidwell said, but the debt service payments would be higher than they are now.

Under option three, the 2001 and 2005 bonds and all subordinate debt will be refunded. The other, non-callable bonds will be refunded through a tender offer, Kidwell said. The debt service average will be $5.7 million for the next 16 years, but all the bonds wouldn't be paid off until 2039. In the other options, bonds would be paid off in 2027.

There's no way of knowing what the inflationary pressures will be like in the next few years, Kidwell said.

But "if you're thinking about doing something, now looks like a good time for maybe doing more than just thinking," he said.

In other meeting business:

* The authority voted to move forward with a plan to recoup the sales tax paid on materials for construction of the Shenandoah Wastewater Treatment Facility.

* The authority approved a resolution for water line relocation for intersection improvements at Ga. Hwy. 16 and Senoia Broad Street/Luther Bailey Road. Typically, utilities are responsible for the cost of relocation, but this project is completely covered by the federal stimulus. The relocation was expected to cost as much as $105,000. The bid came back around $60,000, Cadenhead said.

* The authority agreed to go along with Coweta County reserving some money from "recovery zone bonds."

There has been no obligation so far, but the county must tell the state it intends to use the money, which comes from the federal stimulus program.

The stimulus money will help pay the interest on the bonds.

Cadenhead said the current plan is that Pope and Land, which owns the property known as the "Moreland Megasite," will issue bonds to put infrastructure on the site, including a wastewater treatment facility. The facility would be built to the authority's specifications, and would be turned over to the authority for operation and ownership when complete.

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