DALLAS - The Colorado Water Resources & Power Development Authority will sell $51.2 million of refunding pollution control revenue bonds tomorrow to free up some savings and keep from falling into a negative arbitrage situation.
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The bonds are being sold through the authority's revolving wastewater fund. Loan repayments from borrowers and reserve funds back the debt.
Proceeds from the sale will be used to refund some outstanding clean-water revenue bonds, which were used originally to provide loans to various municipal borrowers to finance improvements to their local wastewater treatment facilities.
UBS PaineWebber Inc. is the senior manager for the negotiated sale. Co-managers on the deal are George K. Baum & Co., Hanifen, Imhoff, A.G. Edwards & Sons Inc., and Harvestons Securities Inc.
First Albany Corp. is the authority's financial adviser. O'Melveny & Myers is bond counsel, and Ballard Spahr Andrews & Ingersoll is the underwriters' counsel for the deal.
"We are looking to price this week," said Michael Brod, the authority's financial director. "I think a lot of people are looking at refunding debt and doing the same thing we are -- trying to avoid falling into negative arbitrage."
Brod said his agency was able to avoid some of the problems associated with negative arbitrage by subscribing for special state and local government securities, or SLGS.
"These securities represent a cheaper way to raise cash than issuing traditional Treasury obligations," he said. "We sent in a subscription, and they sent us a rate sheet -- so using these allowed us to lock in some interest rates and avoid negative arbitrage problems."
However, the agency will take advantage of market rates to refund part of four outstanding bond issues. Tomorrow's sale will take out parts of the authority's Series 1992A, Series 1992B, Series 1994A, and Series 1995A bonds.
"To make the bonds a little more attractive, we are including non-callable premiums beyond eight or 10 years," Brod said. "It helps a little -- investors pay a premium but know their bonds won't be called early."
The authority issues bonds on behalf of a significant number of Colorado municipalities, going to market each year with a total of about $100 million of bonds for its various programs. Most of the bond projects are funded with a 20% subsidy from the state's clean-water and drinking-water program allotments.
"Growth is a reason to issue bonds, but if we are going to be issuing debt for a city, there have to be other factors -- the major reasons for the issuance have to be the fact there is a public health concern or a compliance problem," Brod said.
A Nov. 6 ballot measure for the town of Berthoud, which is located between Denver and Ft. Collins, could spur the authority to sell bonds one more time before year's end. That $10 million general obligation referendum, if approved, would result in a bond sale to finance a new wastewater treatment plant.
In addition, the authority will issue bonds for both its clean-water and drinking-water programs next spring, Brod said.
"There are always water bond issues," he said. "We all live downstream, though a lot of people don't like to think about that. By the time the water gets to your town, it may have been used once or twice already. Here in Colorado, we are usually pretty far upstream. That means our standards have to be higher."
