The Metropolitan St. Louis Sewer District board late last week approved placing a $275 million revenue bond authorization on the Aug. 5 ballot, a plan that would allow the district to hold down rate increases needed to finance new projects.
A rate increase in 2011 would be held down to 28% if the borrowing is approved, compared to a 64% increase if it is not.
The district’s finance team plans to soon launch a competitive selection process for underwriters on upcoming financings. Underwriters chosen through the request for proposals process would manage a $90 million revenue bond sale planned if voters approve the new bonding authority.
Proceeds would go to fund the second phase of projects under a long-term, $3.7 billion capital improvement program to expand and rehabilitate the utility’s entire wastewater collection and treatment capabilities. The plan calls for upgrades to treatment plants, the construction of new plants, repairs, and new sewer line construction.
If a simple majority of voters approves the referendum on Aug. 5, the district wants to have a team in place and a deal crafted to bring before the board later in August in order to enter the market with the $90 million offering as soon as October.
Officials hope to sell voters on the borrowing as the best method for financing ongoing capital projects because it would require significantly lower rate increases than under a pay-as-you-go financing scheme. The balance of the $275 million would not be sold until after July 2009.
The sewer district also is considering a note transaction ahead of its planned use of Missouri’s state revolving fund to issue the $40 million of remaining authority from its last ballot question in 2002, which granted $500 million of borrowing.
The utility has an ongoing contract with Public Financial Management Inc. as its financial adviser but would launch a request for proposals process for bond counsel. The system’s debt carries ratings in the double-A category from all three credit agencies. The sewer district, established in 1954, serves a customer account base of more than 400,000. Eight years ago it won voter approval for a series of charter changes that paved the way for long-term revenue bond issuance.
