DALLAS — The city of Austin is refunding commercial paper, long-term debt and terminating a swap through a $335.9 million negotiated deal Wednesday.

Goldman, Sachs & Co. serves as book-runner on the deal with six co-managers. PFM Inc. is financial advisor, with Fulbright & Jaworski as bond counsel.

The serial bonds maturing annually through 2027 carry ratings of AA from Standard & Poor’s and Aa2 from Moody’s Investors Service. Both have stable outlooks.

“Although the utility has significant plans for future debt, the city has a long demonstrated history of using annual rate increases to support debt and growing operating costs,” Moody’s analyst Kristin Button wrote.

In affirming the senior revenue bond rating, Moody’s also upgraded previous subordinate-lien debt to Aa2 from A1.

The funds from the new issue will be used to convert $190 million in outstanding commercial paper notes to long-term debt.

Austin will also refund for savings the separate-lien Series 2003 and 2004 water and wastewater revenue bonds, according to officials. The new issue will include a termination payment on swap provisions in the 2004 bonds that were synthetically fixed.

The Austin Water Utility serves about 214,000 water customers and about 201,000 wastewater customers in the growing Austin area. The customer base grew well in excess of 3% annually during the economic expansion’s peak in the late 1990s, but officials are projecting growth rates of about half that pace for the next five years.

The system uses water from the Colorado River through the city’s own water rights and purchases it from Lower Colorado River Authority.

The water utility shares city ownership with Austin Electric, the power utility that is in the process of raising rates for the first time in 18 years. The move, considered long overdue by credit analysts, has prompted a petition drive by suburban users seeking to reduce the increase at the Texas Public Utility Commission that oversees public utilities.

On the water and sewer side of the utility, however, officials have more readily adopted rate increases, analysts noted.

“City officials have demonstrated their willingness to raise rates, as necessary, to address roughly $1.02 billion of planned capital expenditures through fiscal 2017,” wrote S&P analyst Theodore Chapman. “There is a long record of annual rate increases to support water and sewer projects, including nearly $400 million of projects related to an administrative order for sewer overflows.”

Austin’s capital improvement plan is aimed at building the city’s third water treatment plant.

Construction of the plant’s first 50 million gallons per day of capacity is on budget and on schedule with operations expected to start in 2014.

To support the investment, the City Council increased water rates by 6.6%, in November 2011, and raised sewer rates by 3.5%. Similar rate hikes are envisioned for the next five years.

“Despite rate increases, the $73 average residential bill for 8,000 gallons of combined service is, in our opinion, reasonable because of the water supply agreements already in place,” Chapman wrote.

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