DALLAS - Glendale, Ariz., will move ahead with projects in its utility capital improvement program with Wednesday's competitive sale of $65.5 million of subordinate-lien water and sewer revenue bonds.
The city will use the proceeds to build a new water treatment facility, upgrade a large regional waste water treatment plan, and repair, replace, and extend portions of the existing water delivery system and sewer mains.
"The money will be used to upgrade our utility system according to our current capital improvement program," said Roger Bailey, director of Glendale Utilities. "When you step forward, you have to keep on walking."
The Phoenix suburb has a population of almost 245,000.
The new Oasis water treatment plant will process 12.5 million gallons of drinking water a day, bringing the city's treatment capacity to 94 million gallons per day, more than sufficient for 2007's peak daily demand of less than 74 million gallons.
The city's utility revenue debt, for both senior and subordinate bonds, has an unenhanced rating of AA from Standard & Poor's. Moody's Investors Service raised its underlying rating on the subordinate utility debt to A1 from A2 with this issue. Moody's has an underlying Aa3 on the senior debt.
Glendale's water and sewer utility currently has $270 million of outstanding subordinate revenue debt, $36.9 million of outstanding senior debt, and $11.1 million of outstanding system general obligation debt.
Bond counsel is Greenberg Traurig LLP. The city's financial adviser is JNA Consulting Group LLC.
The bonds will be insured by Financial Security Assurance Inc.
Raymond Shuey, the city's chief financial officer and director of finance, said Glendale does not usually opt for bond insurance.
"Overall, we felt that bond insurance was the best deal for the city in terms of economics of the sale," Shuey said. "Because of all the turmoil in the bond insurance market, we wanted to be able to have a surety bond on the reserve fund requirement for this deal. We've used FSA before on surety bonds, and it made good sense to obtain bond insurance from them as well."
Bailey said additional treatment capacity will be needed to meet water system needs through 2025, when land within the city limits is expected to be fully developed. The utility estimates that total daily demand upon build out will be about 119 million gallons a day, requiring the construction of two additional water treatment plants by 2015.
"Water resources is a big deal to cities in Arizona," Bailey said. "We're in the state-mandated active management area that covers the Phoenix and Tucson areas. That means we have to be able to demonstrate that we can meet all development needs for the next 100 years."
Bailey said the upgrades will help ensure the utility system meets all current and foreseeable federal regulations.
"We're in compliance with federal regulations with the existing system, but that is a dynamic process," he said. "These projects will help us serve our existing customers better, and provide water for additional customers."
The capital improvement program for the combined utility totals $307 million through 2012, much of which is expected to be met with additional revenue bond sales of $34 million to $66 million a year.
"We expect to be back in the market with another revenue bond sale for the water and waste water needs about this time next year," Shuey said. "The one this week will be our fourth in the last five years."
The slowdown in the Phoenix-area housing market that is creating problems for many local governments does not affect Glendale as much as others, Shuey said.
"We're in a good position," he said. "In recent years, Glendale has not been as reliant as it had been on the housing market and sales tax resulting from residential growth. We have seen an overall economic slowdown in the area, but its effect on Glendale has been marginal."