OKLAHOMA CITY – The Oklahoma Water Resources Board will sell another $250 million in revenue bonds to “recapitalize” its low-interest loan program that finances water and wastewater projects across the state.
The proceeds will last “possibly a year, depending on demand,” said Joe Freeman, chief of the agency’s Financial Assistance Division. The board authorized a $150 million bond sale in 2019 “and we’ve closed more than $112 million in bonds for FAP [Financial Assistance Loan Program] loans since then,” he said.
Freeman believes the revenue bonds will receive an interest rate no higher than 6% “based on current market interest-rate conditions” and the agency’s excellent bond history.
The nine-member Water Board – whose members include Matt Muller of Altus, who farms in Jackson and Greer counties – approved the latest bond sale unanimously Tuesday.
Any city or town or rural water district of any size can qualify for one of the FAP loans, which typically command a below-market interest rate that’s based on the OWRB’s AAA credit rating and which have a maximum 30-year repayment term.
The OWRB began providing emergency grants in 1983 and loans in 1985, Freeman said
In nearly four decades the OWRB has had 46 Financial Assistance Loan Program bond issues totaling $1,474,580,000 and 17 State Revolving Fund bond issues that totaled $1,482,120,000, Freeman said.
Over the life of the Financial Assistance Program, as well as the Clean Water and Drinking Water state revolving fund programs, the Water Board has authorized 1,029 loans totaling almost $5 billion, ledgers reflect. Those low-interest loans have saved communities and rural water districts an estimated $1.6 billion in interest charges, Freeman said.
Besides the loans, as of December 2, 2020, the Water Board also has awarded $102 million in grants for water/wastewater infrastructure projects, OWRB records show. Those included $63.6 million in grants via the Rural Economic Action Plan (created by the Legislature in 1996), $35.5 million in emergency grants, $2.6 million in special purpose grants, and $400,000 in drought grants.
No FAP loan authorized by the OWRB has ever defaulted, because of OWRB security measures, Freeman said.
For example, the state agency files a lien on the borrower’s revenue streams (such as water/sewer and sanitation operations, perhaps the electric system if it’s municipally owned), in some cases on a municipality’s sales tax receipts, and on some loans the OWRB will file a lien on the recipient’s real property.
Also, the loan agreement a borrower signs with the OWRB stipulates that the recipient must maintain a debt coverage ratio of either 1.25 or 1.4. (The debt coverage ratio is net operating income divided by debt service, the ratio of operating income available to pay the principal and interest.)
If not, the borrower must take action within 90 days of receiving notice from the OWRB to increase net revenue (such as raise utility rates, reduce expenses, pledge additional revenues, etc.).
Besides information about a recipient’s ability to pay, every application for financial assistance from the Water Board must be accompanied by a professional engineering report. Topics covered include:
• the number of customers served by the borrower
• population growth/ loss over the preceding 10 years and future population projections
• environmental concerns in the service area
• water use projections
• the proposed project’s design and cost estimate
• borrower’s source of water and water treatment system
• quality and quantity of the borrower’s water supply
• condition of the borrower’s existing facilities
• the borrower’s wastewater treatment and disposal system, “with special reference to their relationship to existing or proposed waterworks structures that may affect the operation of the water supply system or the quality of the supply”