By refinancing its ‘refunding revenue’ water/sewer bonds that were originally issued in 2004, the City of Brookfield is going to save even more money than its bond counsel expected, and that greater savings is being made possible by an even higher bond rating than he thought possible. During last month’s meeting of the Brookfield City Council, Bond Counsel Joey McLiney had speculated that the City has a bond rating of at least triple B (i.e., investment grade) and could have a bond rating as high as A-.
He explained at that time that although it would cost $10,000 to have Standard and Poor‘s give the City a confidential credit rating assessment, a B+ rating at current interest rates would save the City about $79,000 and an A- rating would yield a savings of about $103,000. Tuesday evening, McLiney returned to share the results of Standard and Poor’s assessment with the Council, and the bond refinancing savings were even higher than he dreamed. Standard and Poor’s has given the City an A rating—McLiney observed Brookfield’s rating is actually higher than the State of California’s—and the savings at an interest rate of 3.43 percent will actually be about $184,581.
Referring to just one of the reasons for the A rating, McLiney told the Council, “The analyst at Standard and Poor’s was blown away by the fact that Brookfield water losses in recent years have been at or below eight percent!” Without asking to be pardoned for the pun, McLiney concluded, “You’ll never be under water with this.”
The Council approved an ordinance that authorizes the issuance of water/sewer ‘refunding revenue bonds’ that will allow the City to retire pre-existing bonds with a principal of $1,345,000 that were expected to reach maturity on April 1, 2029. Simplifying matters considerably, McLiney explained during Tuesday evening’s Council meeting, “We’re essentially buying a lower interest rate...You risked $10,000 and received a present value savings of $184,581.” Over the life span of the bonds (i.e., 2013-2029), the ‘total debt service savings,’ to the City of Brookfield is estimated at $303,384.
Water/Sewer Rate Increase
In its continuing effort to incrementally raise water/sewer rates to maintain its ability to issue bonds, as well as USDA Rural Development’s confidence to make a $5 million loan to the City to partially fund a new wastewater treatment plant, Brookfield’s water/sewer rates have been increased. Brookfield City Manager Dave Hane explains, “USDA has a predetermined water rate that we must maintain to close on the $5 million loan they made to us.” As of October 1, the beginning of the new fiscal year, the base rate (2,000 gallons or less) for water will increase by $2.75 a month. The water rate for 5,000 gallons or less will increase by $7.13 a month. The water rate for 5,000 to 10,000 gallons will increase by $11.98. The water rate for 10,000 to 100,000 gallons will increase by $110.08. The rate for sewer service will increase by $2.50 per each 1,000 gallons used. “These increases will get us close to where USDA thinks we have to be,” concluded Hane during Tuesday evening’s meeting of the Brookfield City Council. Councilman Richard Techau observed that according to this new rate schedule, the second 2,000 gallons will be billed at a higher rate than the first 2,000 gallons.