DALLAS — The Oklahoma Resources Water Board will finance its clean water loan program for the next three years with next week's negotiated sale of $85.3 million of revolving fund revenue bonds.
The state board will use the proceeds from the 30-year bonds to provide $46.8 million of low-interest loans to cities, rural water districts, and counties over the three-year spend down period. Proceeds will also reimburse the clean water revolving fund for $36.5 million of loans already made and provide $2 million of state matching funds for federal loans under the Clean Water and Safe Drinking Water Acts.
The retail sales period is set for Sept. 23, with institutional sales on Sept. 24.
The Board currently provides low-interest financing for approximately 70% of water and sewer infrastructure in Oklahoma.
The revolving fund revenue bonds going to market next week, as well as $523.6 million of outstanding debt, are rated triple-A by Moody's, Fitch Ratings, and Standard & Poor's.
Bank of America Merrill Lynch is the senior manager. Co-managers include BOSC Inc., JP Morgan Chase Bank, and Wells Nelson & Associates LLC.
First Southwest Co. is the board's financial advisor.
McCall, Parkhurst & Horton LLC is bond counsel.
"It's a strong, strong credit," said Joe S. Freeman, chief of the water board's financial assistance division. "We've never had a borrower default on either the clean water or drinking water loans."
The bonds are structured in a cash flow mode, Freeman said, with support by loan repayments.
Borrowers must pledge revenues to cover 125% of annual loan repayments and issue a local note that is reviewed by the Board's bond counsel. Qualified entities pay an interest rate equal to 60% of Municipal Market Data triple-A scale plus 55 basis points.
The drinking water and clean water loan programs are separate, Freeman said, but cross-collateralized so reserves from one fund are available to the other in an emergency.
Loan assets, including principal and interest, pledged to the revolving fund revenue bonds total more than $1.2 billion.
Oklahoma voters will decide in November on State Question 764, which would create a credit enhancement reserve fund for the board, supported by the pledge of $300 million of state revenue bonds.
Freeman said the pledged credit would allow the board to leverage $3 billion for water projects.
Without the additional capacity, Freeman said, the Board could only fund 5% to 10% of infrastructure needs over the next 50 years with its current programs. Estimated needs over the period are estimated at $82 billion.
The bonds would be issued only if all other sources of repayment, including loan repayments and reserves, were insufficient, Freeman said.
"It is extremely unlikely that the bonds would ever have to be issued," he said. "The pledge of credit by the state is the important aspect."