On February 5th, the Utility Board approved a Bond Resolution that came before the City Council for the first reading on February 11. The 2nd reading is scheduled for February 25th  and Utility representatives will be prepared to address the Council during the second reading.
I will cover the essential points during my presentation on Feb 25th.   The bond ordinance is a complex ordinance and legal document necessary for the Utility to move forward with bond issues. We will have our bond financial advisors present to address any technical, financial or legal questions concerning the bond ordinance.
My Elevator Speech Version Is:
The Utility needs $110 million in bond funds for required Consent Decree projects that need to completed or begun in 2019-2020. When the Council approved the 2018 Bond Ordinance last November, the utility was able to restructure some of the past bond and new debt to take advantage of issuing State Revolving Fund (SRF) bonds over a long period. (35 years vs 20 years) Plus, amend the past bond ordinances to incorporate language required by the State Revolving Fund to enable the Utility to seek special funding from SRF.
The Good News Is:
The utility will be able to fund the bond payments for the $110 Million bonds (the mixture of General Revenue Bonds and SRF Bonds) with without the need for a sewer rate increase.
As A Side Note – We are still in negotiations with the EPA, IDEM and DOJ to change the scope and timing future Consent Decree Projects to reduce the future burden on ratepayers but have not yet reached a final resolution. While we have made progress in our negotiations, we still have several changes we are requesting the EPA to approve. Whenever we do reach an agreement, that agreement will have to be approved by EWSU, EPA, IDEM, DOJ and the Federal Court … which will not be a quick turnaround. As a reminder, the Consent Decree covers projects over a 24 ½ year period ending in 2040.
As a matter background and maybe a bit redundant … below is a summary of what the 2018 Sewer Bond Ordinances accomplished:
What The Ordinances Accomplish:
All three ordinances basically accomplish the same thing through amendments to prior bond ordinances:
Allows the utility to restructure past Sewage Word Revenue Bonds (2009, 2010A, 2012E, 2016C, 2017A, 2018A) through the State Revolving Fund (Indiana Finance Authority) by allowing the bonds to mature over a period not later than 35 years. The prior bonds issued could not mature over more than 20 years.
We have several projects with a project life of more than 35 years that we can refinance through SRF at a lower interest rate than the interest rate in effect for outstanding bonds.
Ordinance No G-2018-30 also allows us to finance the remaining bonding capacity of $107,355,000 (2016 ordinance) with bonds maturing over a period no longer than 35 years … as opposed to the existing 20-year limitation.
The ordinances make some legal technical corrections that the State Revolving Fund requires for their bond documentation. Sorry, I don’t know the specifics, but I do know those changes have been approved by SRF and our bond counsel (Barnes and Thornburgh)
Why?
The ordinances allow the utility to restructure existing bonds and future bonds that will allow EWSU to lower the Utility’s Annual Debt Payments (ie. 35 years vs a 20 year bond), thus allowing the Utility has the capacity to borrow additional funds to pay for mandated EPA projects (Integrate Overflow Control Program (IOCP) projects and Non-IOCP Projects without asking the council to approve additional sewer rate increases to fund the debt service for the additional debt.
The change also allows us to optimize the amount of low-interest rate bonds we can obtain from the State Revolving Fund (Indiana Finance Authority) rather than a General Revenue Bond.
In other words, we lower the utility’s cost of capital.
Feel free to contact me if you have any questions.
Thanks
Allen Mounts
CEO Of The Evansville Water And Sewer Department
