Issuance of $85 million in tax-exempt bonds to help pay for Sarasota County water quality improvements

County wins AA+ ratings from Fitch and S&P on those new bonds

A slide shown to the county commissioners on Nov. 18 lists facts about the county’s water system. Image courtesy Sarasota County

The day before they received an update on infrastructure projects the Sarasota County Public Utilities Department is pursuing to improve water quality, the county commissioners unanimously approved the issuance of $85 million in tax-exempt bonds for some of those projects.

(See the related article in this issue.)

The board members also approved the issuance of $50 million in federally taxable bonds in an effort to reduce county debt on utility system bonds issued in 2011 and 2013.

The bonds will be repaid by revenue customers pay the Public Utilities Department and through the collection of Water and Wastewater Capacity Fees, a Nov. 17 county staff memo said.

The memo, which was provided to the board in advance of the Nov. 17 public hearing, explained that Public Utilities Department staff “has determined that there are several major projects that will begin in early [Fiscal Year] 2021 that require bond funding amounting to approximately $71,885,000 …”

Among those are the expansion of the capacity of the Bee Ridge Water Reclamation Facility (WRF) from 12 million gallons per day (mgd) to 18 mgd; the conversion of that plant to Advanced Wastewater Treatment (AWT) status, to reduce the level of nutrients entering county waterways; the second and final phases of equipment replacement at the Carlton Wastewater Treatment Facility (WTF) in South County; and a variety of pipeline connections, including a potable water project involving the Peace River, which is the county’s primary drinking water source.

This graphic, included in county budget materials for the 2015 fiscal year, provides details about Phase One of the Carlton WTF initiatives. Image courtesy Sarasota County

Additionally, the staff memo pointed out, a $9-million balance remains on a loan the county secured for the first phase of the Carlton WTF project. “This loan is being refinanced in connection with the issuance of the new money borrow in order to achieve a long-term fixed rate,” the memo explained.

In a Nov. 14 county news release, staff reported that Fitch Ratings and S&P Global Ratings assigned AA+ ratings to the new utility system bonds, which will be sold in early December.

The release said that bond series 2020A will bring in an estimated $62.4 million to finance the improvements to the Bee Ridge WRF and the Carlton facility.

The other bond series the commissioners approved on Nov. 17 — 2020B — will be used “to secure a lower interest rate and interest savings,” akin to the refinancing of a home mortgage, the release noted. Those proceeds, which are expected to be about $44.8 million, will be used to refund portions of utility bonds issued in 2011 and 2013 ahead of those bonds’ maturity schedules, the release said.

Deputy County Administrator Steve Botelho. Photo courtesy Sarasota County

“Although there remains economic uncertainty due to coronavirus, both rating agencies agree that the county continues strong performance in servicing debts and managing financial assets with a solid management team,” Deputy County Administrator and Chief Financial Management Officer Steve Botelho reported in the release.

On Aug. 13, a conference call was conducted among county staff, representatives of the Sarasota County Clerk of the Circuit Court and County Comptroller’s Office, the county’s financial advisor — PFM Financial Advisors LLC — and the county’s bond counsel — Holland & Knight LLP — regarding the planned issuance of the new bonds, the Nov. 17 staff memo said.

Over the past year, “to take advantage of the current lower interest rate environment,” the memo continued, PFM and county staff were monitoring the potential for the county to use “advance refunding” to reduce its debt on the utility system bonds issued in 2011 and 2013.

The Nov. 24 news release pointed out that Fitch and S&P also affirmed the AA+ raging for the outstanding utility system bonds issued in 2011, 2013, 2016 and 2019, “with a stable outlook.”

Those bonds add up to approximately $144.7 million, Fitch said.

“Higher bond ratings are typically accompanied by a lower interest rate,” the memo explained. An AA+ rating “indicates the county is doing a good job [of] paying off current debt and is likely to pay off future debts,” the news release noted. “The rating also indicates a lower risk to investors,” it added.

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