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WMU reviews finance options

February 04, 2011|By Mike Wynn | The Winchester Sun

The Winchester Municipal Utilities Commission is considering options to finance more than $8.7 million in upcoming expenses this year and will need to finalize a decision by early next month to meet a summer deadline.

According to a presentation Thursday, the utility is facing $6.4 million in costs as it ramps up plans for a new water treatment plant in the Lower Howards Creek watershed.

Another $2 million in principal and interest payments are due on a $5 million bond anticipation note, which is scheduled to mature in June. Also, officials expect to spend around $360,000 on capacity, maintenance and environmental programs related to WMU’s consent decree with the U.S. Environmental Protection Agency.

“We wanted to start this process early on so we can work through whatever questions we have tonight or at the next meeting,” said the utility’s financial adviser, Chris Bowling.

Bowling said the commission will need to decide its financial course by early March and seek approval from the Winchester Board of Commissioners in order to close out a bond issuance in May and meet the payment deadline for its bond anticipation note.

The note provided preliminary, short-term financing for WMU’s new wastewater treatment plant project in the Lower Howards Creek Watershed. The utility has since received a $36 million loan for the project from the Kentucky Infrastructure Authority.

Bowling presented two options to consider Thursday night: stand-alone financing and pooled financing through a Kentucky League of Cities program.

He said the debt service on the stand alone option would total about $14 million over the loan’s 20-year lifespan. The pooled option would cost about $400,000 more.

Still, Bowling urged commissioners to consider the pooled option, which does not require WMU to issue and amortize is own reserve. That means joining the pool will lower the present value of the debt service, he said.

In addition to the upcoming expenses, WMU is also examining a possible refinance of $8.5 in bonds from 2002. Bowling said the utility should monitor market conditions and be prepared to move if circumstances improve. Today, he said, interest rates for utilities would not produce any advantages.

“We have seen these rates increase such that these savings to refinance are not there right now,” said Bowling. “But that does not mean we won’t see those savings come back over the course of the next year.”

Contact Mike Wynn at mwynn@winchestersun.com.

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