The Suffolk County Water Authority, which provides water service to the majority of eastern Long Island, is scheduled to sell $80 million of triple-A rated revenue bonds in a competitive offering Thursday.
Proceeds will retire the authority’s outstanding variable-rate bond anticipation notes, Series 2008, and finance improvements to the water system.
The bonds, which will mature in 2038, are payable solely from the authority’s net revenues and are not a debt of Suffolk County.
“We think that demand for this particular issue will be solid,” said Michael Pietronico, chief executive officer at Miller Tabak Asset Management. “It’s obviously an essential purpose — water and sewer — and the service area is fairly large.”
Pietronico said that, given the market supply right now, which is light in New York State, Suffolk County’s financial troubles will probably not affect demand for the authority’s bonds.
Though Suffolk County
“This is not a Water Authority name that you see quite often in the secondary market, so just based on those dynamics, the deal should do very well,” Pietronico said.
The agency last sold revenue bonds in January this year at a true-interest cost of 2.6898%. The $84 million of bonds had maturities from 2019 through 2026.
Fitch cited positive operating results, rate-setting flexibility, and limited future borrowing needs supporting the gilt-edge rating.
Standard & Poor’s had a slightly different view of the authority’s borrowing needs.
“In our view, the authority’s need to raise rates to maintain debt-service coverage near current levels due to increasing debt service requirements and likely continued debt issuance to fund capital needs partially offsets the credit strengths,” its analysts said in a report.
Both agencies assigned stable outlooks.
The authority, founded in 1951, is an independent public-benefit corporation that operates without taxing power and on a nonprofit basis.
In Suffolk County’s recently proposed $2.77 billion budget for 2013, County Executive Steve Bellone said the county is currently exploring options for sewer district operations to enhance the capital expansion of the sewer systems.
This could include a “collaborative relationship” with the Water Authority for sewer district operations.
“I will be working closely with the Legislature on this issue — any proposal, sale, or memorandum of understanding related to a change in sewer operations will have a full public vetting and will require legislative authorization,” Bellone said.
