Tallahassee Reports has learned that the City of Tallahassee’s Treasure-Clerk office is pursuing the refinancing of utility debt that will save approximately $2.2 million in annual debt service for the next 20 years.
The City Commission is scheduled to hear about the issue on Wednesday, September 13th. However, there is no indication the savings will be integrated with the 2018 budget process.
The City Treasurer-Clerk’s staff reviewed the city’s outstanding bonds and, based upon current interest rates, determined that the city could realize considerable savings by refunding the outstanding debt through the issuance of additional fixed-rate bonds.
In 2007, the City issued $164,460,000 in Consolidated Utility Systems Revenue Bonds to fund the construction of a new preliminary treatment facility designed to upgrade nutrient removal limits at the Lake Bradford Road Wastewater Treatment Plant and the design and construction of upgrades to the T.P. Smith Wastewater Treatment Plant.
The most recent city analysis suggests a gross savings over the life of the issue of approximately $44,300,000 and a net present value savings of $23,000,000. This represents a net present value savings level of 16.0%. The City generally targets a savings of 5% to move forward with a refunding.
The total debt service on the new bonds is expected to be approximately $2,200,000 less annually from 2017 through 2037.
However, a review of the wastewater budget for fiscal year 2018 has no mention of the savings. From the city’s most recent budget document:
Although revenues are estimated based on an estimated 2.4% CPI increase, the fund would still show a slight deficit. A rate study for the Wastewater Utility is currently underway to address future funding needs for operating and increasing transfers for capital infrastructure improvements. Once completed, the FY18 Sewer Utility revenues and projected expenses will be adjusted to reflect the study assumptions. It is expected that the study will available prior to budget adoption in September, in order to ensure that the adopted budget incorporates the study results.
TR will continue to investigate how the savings will accrue to the benefit of the citizens.