The Coweta County Water and Sewerage Authority board voted unanimously Wednesday to move forward with pursuing refinancing of bonds issued in 2007.
Predictions are that the refinancing could save the authority nearly $2 million over the life of the bonds, with most of the savings realized in 2016 through 2020 -- years when the authority anticipates a steep increase in debt service because of bond maturation.
The authority is currently paying debt service on the series 2001 bonds, 2005, 2007 and 2010 bonds.
The 2010 bond issuance included paying off some older bonds and refinancing, as well as getting cash. But at the time, the market conditions weren't good enough to make it worthwhile to do anything with the 2007 bonds, according to Larry Kidwell of Kidwell and Company, the authority's bond consultants. "The analysis was conducted and it didn't make sense, in our opinion, to refund the 2007 bonds. There wasn't enough savings."
"The rates have moved since then," he added.
"We did a very careful review of each obligation the authority has outstanding, beginning with the 2001 bonds," said Tony King of Kidwell. The 2001 issue was too small to make it worthwhile, according to King. The 2005 bonds are not "callable" -- meaning they can't be paid off early so they "were not viable candidates for refunding," King said.
King said they came up with five different scenarios, which spread the savings in various ways. Option one would provide the greatest overall savings, as well as the greatest on a "present value basis." Option one would be a level savings of approximately $98,000 per year until 2037.
But option five was preferred by staff. "The reason is pretty obvious," King said. "There is a jump up in the annual debt service once you get to fiscal year 2016 -- from about $5 million to over $7 million," he said. "The idea is to lower the annual debt service cost in those years and provide an opportunity for the authority, as the economy recovers, to start to experience organic growth and build customer base and revenue base," King said. "And be in a better position to handle the debt service after 2020."
The savings would be $393,000 in 2016 and 2017, and $388,000 in 2018-2020. Under the plan, the yearly debt service would decrease, by widely varying amounts, every year until the bonds are paid off -- except for 2036, when the debt service would increase. But the increase would only be $712.
The estimates are preliminary, of course, and actual savings will ultimately depend on the market and the interest rate the authority pays.
Authority General Manager Ellis Cadenhead said he has been in conversations with Kidwell and Company for the past year and a half, watching and waiting on the market conditions to be right. "Knowing how we are forecasting in the future, the growth we are anticipating -- we came to the conclusion that now would be the time to do it," Cadenhead said. "I feel it's probably the best time we'll have," he said. "If y'all do agree to go ahead, I think we need to do it at a fast pace."
"The reason for the debt structure the way it is is you have to build these very expensive infrastructure components to accommodate growth," said board Chairman Neal Shepard. "As the growth comes then you can afford to pay the debt. As we all know, growth has not been what we have anticipated," he said. But they're predicting "probably an unusual growth spike over the next few years."
Because the authority has improved its cash position with the money from a settlement over faulty polybutylene pipe, there is also the possibility that the authority's bond rating might improve. It is currently rated at AA-.
Now that the board has approved moving forward, there is more work to be done before the final approval.
In other meeting business:
n Cadenhead announced that the authority has switched to the new billing system. The new Tyler system is "working extremely well," Cadenhead said. "Not to say we haven't gone through some trials and tribulations."
The online payment system is currently down and will be for about a week, Cadenhead said.
It took about three months to complete the software changeover, Cadenhead said. There will be an explanation of the new billing format in customers' bills, he said. "I think it looks very professional."
n System pressure is up, and the higher pressure may be the new normal. "Our tanks are full, based on us just buying what we need to buy and not using as much," Cadenhead said. The tanks' levels are the highest they've been "in a long time," Cadenhead said.
The higher pressures did cause a few leaks to show up, he said.
n The board voted to move forward with purchasing $6,500 worth of security equipment for authority facilities.
