On Debt Issuance Prepared by Public Advisory Consultants February - PowerPoint PPT Presentation

On Debt Issuance Prepared by Public Advisory Consultants February 17, 2016 By Lester B. Guthorn Managing Director

71% of the CIP is projected to be paid from municipal bonds over the next 6 years The Commission is authorized under Maryland State code to issue debt, including municipal bonds, notes, leases, certificates, etc.

 Capital Improvement Program  list of projects to be financed  Approval of CIP projects to be financed by WSSC Commissioners  Debt Affordability  Budget sufficiency to pay for new debt to be issued and debt service to be paid  Appropriate legal approvals of bond issuance and budget by Commission and Counties

 Drafting of legal documents  Obtain budget and debt issuance approvals  Drafting of bond offering document, (Official Statement) developed by WSSC finance staff, bond counsel and financial advisor

 Information contained in official statement:  Primarily a legal contract with bond holders and authorization to issue bonds  Description of security features of the bond, backed by an unlimited tax pledge  Debt service is paid from water & sewer revenues  No ad valorem tax has ever been assessed  Description of Management team, Commissioners and Principal staff  Financial information, budget, pension obligations and system, audit

 5 years of revenue and expenditures  Debt information such as:  Amount of prior issuance and this issue  If a refunding, impact on WSSC debt outstanding  CIP summary  Future debt issuance plans and types of debt outstanding  Debt policies, debt coverage if applicable  Description of the economy  Summary information on Prince George’s and Montgomery Counties

 Determination of type of debt to be issued:  Short term  (Note Program – presently used)  Long term  General obligation (all issuances to date) – currently issued as 30-year debt  Revenue bonds (none to date, but allowed under State law)  Maryland Water Quality Financing Administration  Water Quality Revolving Loan Fund  Drinking Water Revolving Loan Fund  Annual appropriation or P3 (public/private partnership)

 Competitive Sale  New money – General Obligation (GO), Revenue or Annual Appropriation  Refunding – GO, Revenue, or Annual Appropriation  Short fixed rate and term “NOTES” can be sold thru competitive bid (1-5 years)  Negotiated Sale (hire investment banking firm)  Refunding bonds  Historically sold competitively but can be sold through negotiation  Revenue bonds or Annual Appropriation bonds (none issued to date)  Variable rate demand notes (“VRDNs”)  Sold thru negotiation

 WSSC general obligation bonds are rated as follows:  Fitch Rating – AAA  Moody’s Investors – Aaa  Standard and Poor’s – AAA  WSSC Multi-Modal Bond Anticipation Notes are rated as follow:  Fitch Rating – AAA/F1+  Moody’s Investors – Aaa/VMIG1

 Evaluation includes:  The official statement (OS)  Last five years of audits  CIP  Budgets  Legal approvals  Web site, articles in newspapers  Personal interview with WSSC staff, (generally CFO and GM/CEO and from time to time a Commissioner)  Security pledge (revenue, general obligation etc.)  Prince George’s and Montgomery County financial, economic and other related information  Key focus is on:  Financial flexibility  Debt service coverage  Ability to meet obligations  Rate, fee and charge history  The economy and WSSC’s independent ability to implement budget and service charges and rates  Unlim limit ited tax ax ple ledge on all all property y (even though never used) is is key y com ompon ponent for or gene neral obl obligation bon bond d issuance