Spokane, Wash., to Sell $175M of Green Bonds

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SAN FRANCISCO — Spokane, Wash. is planning to sell $175 million of green bonds next week in a competitive offering.

The bonds are water and wastewater system revenue bonds, which have been designated as "green" bonds because they will be used to finance green projects that will provide environmental benefits.

The bonds, which are secured by a special fund of the city as well as pledged revenues of the water and wastewater system, are expected to be sold on Tuesday.

Proceeds will go toward financing capital improvements that will improve the health of the Spokane River, protect the region's sole-source drinking water aquifer, and to make other necessary improvements to the city's water and wastewater system.

The bonds have been assigned a Aa2 rating from Moody's Investors Service and a AA rating from Standard & Poor's.

"The rating reflects our view of the water, sewer, and stormwater system's very diverse customer base and strong liquidity position," said Standard & Poor's credit analyst Robert Hannay. "Further supporting the rating is our view of the city's history of raising rates, which has led to net revenues that provide strong coverage of future maximum annual debt service."

The agency applied a stable outlook to the bonds.

Moody's also noted the system's solid debt service coverage levels, adequate water supply, and treatment capacity for the stable and predominantly residential customer base.

"These ratings will help assure lower interest rates on our bonds when we sell them next week," said Spokane's chief financial officer, Gavin Cooley.  "This strong performance, along with the appeal of our environmentally beneficial projects, should attract investors to our issue."

Spokane is the second largest city in Washington with a population of about 212,000. The city collects, manages, and treats wastewater generated within its service area. Its water system serves approximately 99.9% of the city's residents.

Moody's said it expects the system's water supply and treatment capacity to be sufficient over the long-term given the current demand and limited growth in customer accounts.

Next week's deal will be structured as serial bonds, maturing in 2015 through 2034. According to Marlene Feist, the city's utilities communications manager, debt service, including principal and interest costs, is expected to total around $14 million annually.

Bond counsel on the deal is K&L Gates LLP and financial advisor is A. Dashen & Associates.

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