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

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