OMWD Saves Ratepayers Over $2.5 Million with Bond Refinancing
Olivenhain Municipal Water District completed a bond sale on August 4 to refinance its outstanding 2006A Water Revenue Refunding Bonds, with net present value savings of approximately $2.58 million over the next 12 years.
The 2015 Water System Refunding Revenue Bonds were sold competitively with fourteen financial institutions bidding on the sale. J.P. Morgan was the winner of the sale with the lowest true interest cost of 2.21 percent.
“Our Finance Committee initially moved forward with the refinancing effort in order to take advantage of the district’s strong bond rating along with favorable market conditions,” explained Kimberly Thorner, OMWD’s General Manager. “We had initially targeted $1.8 million in net present value of savings, so we are very happy having achieved approximately $700,000 more than expected. The timing was right and OMWD has worked hard to prepare itself to be able to take advantage of the great market conditions.”
The bond sale came just weeks after OMWD’s AA+ Stable rating was reaffirmed by Standard & Poor’s. Credit ratings are key indicators for assessing the financial health and long-term sustainability of an agency.
Maintaining its exemplary bond rating allows OMWD to obtain a lower borrowing rate, which translates into a reduction in OMWD’s debt service costs which are collected from water rates and charges. Whenever economically feasible, OMWD refinances its outstanding debt obligations to help reduce pressure on water rates, especially as wholesale water costs are expected to increase in the future.
“The AA+ rating is highly favorable and equates to lower interest rates for OMWD,” stated Larry Watt, Board Treasurer. “This provides us with flexibility as we consider funding critical capital improvement projects; it also maintains low debt service costs to the benefit of our ratepayers, and has helped create an opportunity to refinance existing obligations.”