LOS ANGELES — The Washoe County, Nev., Commission has approved an ordinance to create a bond bank despite concerns from opponents about potential risks to the county’s AA bond rating.
The bond bank was created to facilitate a merger between the county’s Department of Water Resources and the Truckee Meadows Water Authority.
The ordinance passed in a 3-2 vote at the Dec. 13 board meeting.
The creation of a bond bank would enable Nevada’s second largest county to issue bonds on behalf of local municipalities, gaining a lower interest rate for the entity, which would then pay Washoe for the annual debt service.
One of the ordinance’s staunchest opponents, Robert Barone, a partner with Universal Value, an investment advisory firm based in the county seat of Reno, compared the ordinance to borrowing money from your bank for a neighbor who has a lower credit rating.
“It was approved, despite the fact that every reputable economist in the area spoke against it,” Barone said. “These commissioners may only intend for the TMWA to use it, but influential people may convince a different set of commissioners to broaden the definition.”
The ordinance, originally proposed in May, was crafted to facilitate a merger of the two water agencies by refinancing the $26.1 million in county DWR bond debt, according to John Sherman, Washoe’s finance director. The county has to retire the bonds before the merger goes through because the DWR’s revenues are used to back the bonds, he said. The Truckee Meadows Water Authority would repay the new bonds.
The TMWA, a joint-powers authority formed by Washoe County and the cities of Reno and Sparks, is the largest water provider in the county. The county has 19,000 customers primarily in unincorporated areas while the TMWA has 90,000 customers, Sherman said.
“If the ordinance had not passed, it probably would not have extended the time it will take to complete the merger, but it would have cost county residents more,” said Jeff Tessier, the authority’s chief financial officer.
Barone said the ordinance wasn’t necessary, because the TMWA can finance itself. The estimated difference in cost of $3.9 million over 25 years is a two cents per-day per-customer savings, he said.
Issuing the bonds through Washoe would result in $1.6 million in interest savings and $2.3 million in savings from not having to create as big a reserve, by issuing general bonds as opposed to revenue bonds, Sherman said.
The county commissioners discussed adding amendments next month that include capping the issuance limit to the $26 million of DWR debt. The current cap, based on a percentage of Washoe County’s assessed value, puts the limit at $2 billion. They are also contemplating requiring a supermajority to issue bonds through the bond bank, Sherman said.