Bossier City, La., Selling $125 Million For Major Water Treatment Project

DALLAS - Bossier City, La., will provide sufficient water treatment capacity for the next two decades with a major project financed by the city's upcoming sale of $125 million of utilities revenue bonds.

The city in northwest Louisiana, located across the Red River from Shreveport, will use the bond proceeds to build a new sewage treatment plant with a capacity of 25 million gallons per day and to upgrade the existing treatment plant, which has a capacity of 20 million gallons per day.

The sale is set for mid- to late October, said William J. Buffington, finance director for Bossier City.

Phelps Dunbar LLP is bond counsel on the issue. The city's financial adviser is Government Consultants of Louisiana Inc.

Merrill Lynch & Co. is the sole underwriter of the bonds.

The bonds are rated A3 by Moody's Investors Service and AA-minus by Standard & Poor's.

Standard & Poor's said it raised its rating on Bossier City's utility revenue debt from A-plus to reflect the city's "continued economic development, the city's willingness to raise water and sewer rates, and strong liquidity position."

The city currently has only $24.5 million of outstanding debt. Debt service is expected to increase to approximately $10 million a year from approximately $2.5 million beginning in fiscal 2009 with the sale.

The City Council approved rate increases last year that averaged 150% for water rates and 100% for sewer rates to meet the increased debt service. Net revenues have averaged $4 million a year for the past three years, but the rate increases that went into effect Jan. 1 should bring revenues to $13.9 million in fiscal 2009.

Standard & Poor's credit analyst Scott Sagen said the significant utility rate increases indicate an intention to raise rates as necessary to provide adequate coverage.

"We believe Bossier City officials will continue to make rate adjustments, as needed, to maintain debt service coverage and liquidity and that any capital requirements will be a manageable portion of the overall budget," Sagen said. "The city's willingness to raise rates as needed and ability to attract new large utility customers within the service area provide additional credit stability."

Buffington said the new treatment plant is necessary to service additional customers added since the original plant was built, and to meet the needs of additional drilling rigs seeking natural gas in the area.

Some 90 rigs are expected to be drilling for gas in the Haynesville shale formation soon, a 28% increase in the number of rigs currently operating in the region. Water used at the rigs will be purchased from the Bossier City utility system.

"We had already planned for the new treatment plant, based solely on population and industrial growth, before the natural gas discovery occurred," Buffington said. "That was sort of a plus."

Buffington said a bill currently pending for the 2009 session of the Louisiana Legislature would require drilling companies to purchase water from the local municipal utility. The companies could not drill their own water wells, Buffington said, to protect the state's groundwater supply.

Buffington said the combined capacity of the two plants should be sufficient for the city's needs for 20 to 25 years.

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