PHOENIX — Portland, Ore., will execute the largest refunding in city history when it issues some $400 million of sewer system refunding bonds Aug. 18.

The deal will be competitively sold in two tax-exempt series, according to the preliminary official statement published late last week. The first series will be just under $342 million of first-lien bonds, while the second will be about $62 million of second-lien debt. The first-lien bonds carry ratings of Aa2 from Moody's Investors Service and AA from Standard & Poor's, while the second-lien bonds are rated Aa3 by Moody's and AA-minus by S&P.

"We're really excited," said Jonas Biery, Portland's debt manager. Biery said the city has never done such a large refunding before, and expects to realize about $30 million in present value savings by refinancing debt issued back in the mid-2000s.

"We certainly expect good participation," Biery said.

The bonds are special obligations of the city, payable from the city's sewer revenues and certain dedicated accounts. Biery said the city typically borrows for the sewer system every two years, but this issuance is much larger because some of it is also being used to refund some of the debt incurred in the roughly $1 billion sewer overflow project the city completed in 2011.

That project greatly reduced the amount of sewage reaching local water sources during heavy precipitation, cutting overflows  to the Columbia Slough by more than 99% and to the Willamette River by 94%, according to the city. The city's systems once fed directly into the river, but the city began diverting it and feeding it through treatment plants in the mid-20th century.

"Instead of an average of 50 Willamette River [combined sewer overflow] events each year, there are now an average of four CSO events each winter and one event every third summer during only very heavy rain storms," according to the city.

Portland operates about 2,300 miles of sewer piping serving more than 600,000 people. The city has already approved annual rate increases of more than 3% through the next several fiscal years, and financial information on the offering documents projects that system development charge revenues will average $14.6 million annually. The city's long-term debt forecast assumes further second-lien bond issuances of just over $350 million leading up to fiscal year 2020.

Hawkins, Delafield & Wood is bond counsel on the deal, and Public Financial Management is the financial advisor.

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