DALLAS - The Kansas Development Finance Authority on Wednesday will sell $65.8 million of revenue bonds in the 17th tranche of debt issued to finance local wastewater treatment plants under the state's revolving loan program.
The revolving fund revenue bonds carry unenhanced triple-A ratings from Moody's Investors Service and Standard & Poor's.
Proceeds from the competitive sale will provide $5.6 million for the state's required 20% match for federal clean water capitalization grants, with the remainder loaned to cities, counties, and utility districts to use as leverage for grants from the federal Environmental Protection Agency and other agencies.
About 30% of the proceeds will reimburse the state for loans already made.
Bond counsel is Gilmore & Bell PC. Public Financial Management Inc. is the financial adviser to the KDFA.
The first debt sold for the program totaled $71.2 million in 1993. The most recent sale was in 2005, with the issuance of $118.9 million of state match and leverage bonds. Sales since 1993 have totaled $695.4 million, with $363.9 million of outstanding debt.
Jim MacMurray, KDFA's vice president of finance, said the sale schedule is determined by when the local districts need the money and not by market conditions.
"It's an intersection of supply and demand," he said. "The demand side is from the cities and counties, and the supply is the equity that is available from the EPA grants."
"We don't really have much flexibility with the sales schedule," MacMurray said. "We could delay it by a month or so if we had to, but the sale is really being driven by the need for the proceeds."
Another factor in the scheduling of the bond sale is the 2005 Tax Increase Prevention and Reconciliation Act, MacMurray said, which requires issuers to disburse 30% of the proceeds from a debt sale within a year, and 95% of the proceeds within three years.
"We have to meet those first- and third-year hurdles, or we could be required to call the bonds," he said.
The Kansas Department of Health and Environment will loan the proceeds from the leverage bonds to local entities at a subsidized rate of 60% of The Bond Buyer's 20-bond index as published in the Friday editions for the three previous months.
The state match bonds will mature in 2013, with the final maturity on the leveraged bonds set for 2029.
The state match bonds are secured by loan interest payments from borrowers, interest earnings from all funds, and debt service reserve funds. The leverage bonds are secured by loan principal payments, excess interest payments, interest earnings not needed for debt service on the state match bonds, and debt service reserve funds.
The Legislature strengthened the state's revolving loan program in 2006 by authorizing a cross-collateralization arrangement between the clean water revolving loan program and the drinking water revolving loan program. With some restrictions, monies available in the respective accounts can be used for the other program's debt service requirement.
The clean water program has had no defaults in its 16 years, and only one late payment.
The clean water loan pool includes 308 borrowers with $777.4 million in outstanding loans. The 10 largest borrowers account for 40% of the loans, with 44% of the borrowers each having less than 1% of the combined pool.
