OKLAHOMA CITY – The Oklahoma Water Resources Board received permission from the Council of Bond Oversight earlier this month to issue up to $250 million in revenue bonds to “recapitalize” its low-interest loan program that finances water and wastewater projects across the state. The true interest cost on those bonds is 4.08%, said Joe Freeman, chief of the OWRB’s Financial Assistance Division.
The first tranche of those bonds, totaling $77,280,000, was sold on May 10 and will close on May 19, records reflect.
The nine-member Water Board previously approved the latest bond sale. Members of the board include Matt Muller of Altus, who farms in Jackson and Greer counties, and Ron Justice of Chickasha, a retired county extension agent who served in the Legislature for 12 years.
The new FAP bond issue is expected to produce $74,465,000 in net loan proceeds that will be coupled with $185 million in loans from the Drinking Water State Revolving Fund to finance improvements to Edmond’s water treatment plant and construction of a new water intake structure at Lake Arcadia, one of the town’s three sources of drinking water.
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. The OWRB’s FAP bonds received a AAA rating from Standard & Poor’s and have a maximum 30-year repayment term.
OWRB bond issues
have totaled $3.2B
The OWRB began providing emergency grants in 1983 and loans in 1985, Freeman said.
In nearly four decades the OWRB has had 51 FAP bond issues totaling $1,595,260,000 (not including the one slated to close this month) and 18 State Revolving Fund bond issues that totaled $1,681,120,000, said Tonya White of the OWRB’s Financial Assistance Division.
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 1,076 loans totaling $5,648,907,719, ledgers reflect.
Communities and rural water districts have saved an estimated $1.3 billion in interest charges on loans and grants awarded by the OWRB, Freeman said.
Besides the loans, the Water Board also has awarded $104 million in grants for water/wastewater infrastructure projects, OWRB records show. Those included $65.2 million in 734 grants via the Rural Economic Action Plan (created by the Legislature in 1996), $35.77 million in 600 emergency grants, $418,848 in six drought grants, four “Water for 2060” drought grants totaling $1.5 million, and four emergency drought relief grants totaling $1,125,000.
No FAP borrower
has ever defaulted
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:
Ÿ the number of customers served by the borrower.
Ÿ population growth/loss over the preceding 10 years and future population projections.
Ÿ environmental concerns in the service area.
Ÿ water use projections.
Ÿ the proposed project’s design and cost estimate.
Ÿ borrower’s source of water and water treatment system.
Ÿ quality and quantity of the borrower’s water supply.
Ÿ condition of the borrower’s existing facilities.
Ÿ 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.”