DALLAS - Cities, counties, and rural water districts across Kansas will finance water supply projects with the proceeds from the Kansas Development Finance Authority's negotiated sale of $96 million of lease revenue bonds.
Approximately $4.8 million of the proceeds will provide the required 20% state match for federal drinking water grants, said Jim MacMurray, vice president for finance at KDFA. The remaining proceeds will be distributed as subsidized loans to dozens of entities in the state's public water supply revolving loan program.
"There are a very large number of participating municipalities and rural water districts in the program," he said. "It's very good for them, as they are able to borrow money at much better rates than they could otherwise."
About 30% of the proceeds will reimburse the program for earlier expenditures, MacMurray said.
Borrowers pay an interest rate equivalent to 80% of the three-month average of The Bond Buyer's 20-bond index immediately before issuance.
The loan program is overseen by the KDFA and the Kansas Department of Health and Environment.
"We expect the bonds to price during the week of Sept. 8," MacMurray said. "We anticipate a retail sales period as well."
Citi is the lead underwriter on the KDFA bonds. Co-managers included Wachovia Capital Markets and JPMorgan.
Bond counsel is Gilmore & Bell PC. Public Financial Management Inc. is the financial adviser.
The state's water revolving loan revenue bonds carry an unenhanced triple-A rating from all three agencies with an upgrade by Moody's Investors Service to Aaa from Aa1. With the sale, KDFA will have $333.2 million of outstanding water supply bonds.
MacMurray said the program has a debt service reserve fund of approximately $83 million and could sustain a high level of defaults by borrowers without affecting the bonds.
The $4.8 million of state match bonds will be supported by interest payments on the loan and revolving fund interest earnings, with the remaining bonds supported by payments of principal, excess interest payments, and interest earnings not needed for debt service on state match bonds.
The bonds will be directly secured by 139 loans totaling $349.7 million of outstanding principal. Borrowers must pledge their system revenues to repaying the loans.
MacMurray said the finances of the revolving loan program were enhanced in 2006 when the Legislature authorized a cross-collateralization of the drinking water revolving loan program with the state's clean water revolving loan program that finances sewer system and water treatment projects.
"The two programs support each other," MacMurray said. "Money in one program is available to meet the debt service on the other if either comes under stress."
The two programs include a total of 328 borrowers with $963.2 million of outstanding loans.
