Authority moving forward on bond issuance
by SARAH FAY CAMPBELL
The Coweta County Water and Sewerage Authority will be moving forward with the issuance of $29.5 million in bonds — because if the authority waits much longer, it might not be worth moving forward.
The authority has been waiting since December on market conditions to be just right for the issuance of the new bonds, which will pay off the 2001 and 2007 bonds and help level the authority’s debt service.
Those conditions never were quite right, and now it looks like they’re as good as they are going to get.
“The interest rates are not in our favor,” said WASA CEO Jay Boren at Wednesday’s authority meeting. “The goal we really want to meet is to level out our debt.”
At one time, it was hoped the refinancing or “defeasance” of the old bonds would net a savings of around $2 million.
With current rates, the total savings will only be around $391,000.
CFO Andrew Caldwell said he met with the bond advisors and “spent some time modeling some different scenarios.”
“Jay and I really wanted to make sure that we really looked at every potential option, modeling that out and trying to understand how we can best manage the authority in the best fiscal way possible.”
With current market volatility and trends, it looks like rates will be moving higher.
“There is a greater chance of interest rates rising than of interest rates decreasing, at this point in time,” Caldwell said. “If we wait too long, we may not be in a position to achieve savings.”
Without the refinancing, the authority would see its debt service jump in 2016 and remain exorbitantly high until 2026.
The bond issuance would lower debt service through those “critical years” by about $1 million per year. However, the debt service would go up by about $500,000 per year from 2027 to 2040.
The authority would also see debt service go down by $400,000 to $500,000 in the next two years.
In addition to the changing rates, there is also a time crunch related to the 2010 bonds. The authority has approximately $6 million left from that bond issuance, and it has to be spent within three years. That money will be rolled into the refinancing.
The 2001 and 2007 bonds are currently backed by Coweta County taxpayers. Newer authority bonds are backed only by the authority.
“The taxpayers will be off the hook for $29.5 million,” said authority Chairman Neal Shepard.
If the authority didn’t do the bond issuance and faced the higher debt service payments in 2016, the authority wouldn’t be in compliance with the required maximum debt coverage ratios.
“If we are unable to maintain” the required ratio, “we would have to look at our rate structure” to increase revenues, Caldwell said.
The bond issuance is pretty much ready to go, as everything has been prepared ahead of time. Hopes are for it to take place in the next week or two.