Florence refinances bonds for water and sewer system

FLORENCE — The city of Florence has issued $99 million of refunding and new-money revenue bonds for its water and sewer system, saving the city’s utility system more than $5.5 million by refinancing bonds originally issued in 1993 and 2000.

The bonds included $31.005 million of refunding bonds and $67.995 million of new-money bonds.

The city received competitive bids for this offering rather than the more customary practice of selling the bonds on a negotiated basis to one underwriter. The city's approach worked well, as a total of 16 bids were received.

City Manager David Williams welcomed the results.

“The combination of greater than expected savings resulting from the refunding and the lower than expected interest costs resulting from the BABs is a wonderful result for our utility system and its customers,” Williams said. “It permits the city to accomplish necessary upgrades to our region’s wastewater treatment facility, which will generate economic and environmental benefits for many years to come.

“The system’s ratings of Aa2 and A+ by Moody’s and Standard & Poor’s are a strong recognition of the city’s financial management, control and discipline, each of which is reflected in the very successful sale of these revenue bonds.”

“This is the single biggest bond issuance that the city of Florence has done in its history,” Mayor Stephen J. Wukela said. “Because of the able of our staff, particularly David Williams, Thomas Chandler and Drew Griffin, this city has saved the taxpayers significant amounts of money, while at the same time financing this critically important improvement to our infrastructure.”

Ten bids were received for the refunding bonds. UBS Financial Services of New York submitted the winning bid with the lowest interest cost of 3.27 percent. The refunding bonds will mature in years 2010 through 2024.

The new-money bonds reflected another innovation in addition to use of the competitive sale structure. Dealers had the option to bid on this offering as traditional tax-exempt bonds or as taxable Build America Bonds (BABs).

Florence received six bids as taxable BABs. Ramirez and Company of New York submitted the winning bid with the lowest interest cost of 3.96 percent. The new-money bonds mature in years 2025 through 2039.

The proceeds from the new-money borrowing will be used to complete the rehabilitation of the wastewater treatment facility as well as expand treatment capacity at what will now be known as the Florence Regional Wastewater Management Facility (WWMF).

The project consists of improvements such as piping, general site layout, wastewater treatment unit processes and structures which will accommodate future expansion of the WWMF to 22 Million Gallons per Day (MGD) from the 18 MGD to be achieved with this borrowing.

Specifically, improvements will include construction of new influent pumping, hauled waste and grease receiving and processing facilities, fine-bubble diffused aeration tanks, effluent pumping, solids processing improvements, effluent disinfection, administration building, odor control and related miscellaneous improvements. All are in accordance with the most current federal and state environmental standards.

The BABs issued for the Wastewater Management Facility were a creation of the American Recovery and Reinvestment Act of 2009. This aspect of the stimulus package adopted by Congress is designed to expand the market for state and local government bonds. The “Direct Payment” BABs will pay the city of Florence a federal subsidy by the U.S. Treasury Department in an amount equal to 35 percent of the total interest payable on the bonds.