DALLAS — Arkansas will issue the 25th tranche from a $260 million voter-approved authorization with Wednesday’s competitive sale of $25.4 million of general obligation bonds, proceeds of which will be dedicated to wastewater, drainage, and flood control projects sponsored by local governments.
The bonds are being issued through the Arkansas Natural Resources Commission under an authorization voters approved in November 1998. The enabling legislation limits the total amount of bonds issued under the program to $60 million every two years.
The bonds carry an underlying rating of Aa2 from Moody’s Investors Service and AA from Standard & Poor’s.
Morgan Keegan & Co. is the commission’s financial adviser. Friday, Eldredge & Clark LLP is bond counsel.
Jim Fowler of Morgan Keegan said he expects the debt to be well received in the market.
“We anticipate a good response to this issue,” he said. “It has good, strong ratings, even without any credit enhancement, and should do well.”
Wednesday’s sale will be one of the largest of the 24 GO issues since 2001 that have been completed under the 1998 authorization, said Mark Bennett, chief of the Natural Resource Commission’s water resources development division.
“This is our biggest bond issue in several years,” Bennett said. “But we’re looking at least another issue a little smaller than this one, or maybe two more, during this biennium. We’ve never issued the full $60 million over two years, but this time we’re going to be close.”
The state’s current biennium ends in June 30, 2009.
“We’re looking at a total of at least $50 million over this period,” Bennett said. “There is no doubt the need is there.”
A recent estimate by the U.S. Environmental Protection Agency put the state’s capital needs for wastewater treatment at approximately $500 million.
“We do all we can, but the need is so much larger,” Bennett said. “It is kind of sad, and kind of difficult.”
The largest single appropriation from the bond proceeds is $6.2 million for a regional wastewater treatment facility being built by the Northwest Arkansas Conservation Authority. The money will reimburse the agency for the temporary financing it used to acquire land for the project, Bennett said.
“The authority will probably be issuing bonds sometime this year for the first part of their share of the project,” Bennett said. “We expect the state eventually will provide a total of $33 million to $35 million for the entire project from this and later bond issues, with the regional authority responsible for a similar amount.”
Another $3 million of the projects will be used to provide the state matching funds for federal drinking water grants.
The remainder of the proceeds are earmarked for direct loans to local governments for a number of wastewater, irrigation, and solid-waste disposal projects across the state, Bennett said.
“Most of the projects we finance have an average cost of about $1 million,” he said.
The remaining capacity from the 1998 authorization would be increased by $300 million if voters approve a measure that was placed on the November ballot by the 2007 Legislature. The proposal retains the prohibition against the commission issuing more than $60 million of GO bonds every two years.
The proceeds could only be used to finance or refinance water, water disposal, pollution control and prevention, drainage, irrigation, flood control, wetlands, and aquatic resources projects.
No more than $100 million of the bond proceeds could go to irrigation projects.
