CHICAGO - Kansas City, Mo. voters April 8 authorized $500 million in water-revenue bond borrowing and city charter changes that will impact financial planning.
Voters approved the bond authorization by a ratio of 79 % to 21 %, with low voter turnout. The city expects to tap about $50 million of the allocation annually over the next 10 years.
Supporters argued the market's low interest rates made the borrowing affordable and that water rate hikes are already scheduled to support repayment of the debt.
"The people of this city understand our needs for infrastructure. This will enable us to keep our promise to upgrade our water system," Mayor Sly James said.
Voters also approved various city charter amendments including one that requires a minimum 1% of its general fund be aside and that the city produce a five-year fiscal plan with updates annually. Another change will reduce the number of city departments by three.
City voters in 2012 approved a $500 million sewer bond referendum which has allowed the city to keep rate hikes in check as it completes projects under a $2.5 billion federal consent decree. That authority is also being tapped over 10 years.
Ahead of the city's water revenue bond sale last year, Moody's Investors Service affirmed its Aa2 rating on $253 million of senior lien. Its $30 million of subordinated debt is not rated by Moody's. The bonds are secured by a senior lien pledge on the water system's net revenues.
The system's credit benefits from the large service area, a stable regional economy, debt service coverage levels that have improved following consecutive rate increases, adequate net working capital, favorable debt profile with future borrowing expected, and satisfactory legal covenants.
Challenges include long-term sustainability of the main water source because of declining water levels due to degradation of the river bed, and sewer system rate increases necessitated by the federal consent decree which could limit political willingness to continue implementing timely rate increases for the water system.