Bond, Consulting or Both:
NHA Contributions: Helped developed new reserve policies for the Agency and spearheaded two rating presentations that both helped attain upgrades and significant debt service savings.
Project Completion: June 2016
NHA Contact: Craig Hill and Rob Schmidt
Unique Characteristics of Project: NHA helped the Agency create new reserve policies and initiate a Prop. 218 rate increase process. Multiple SRF loans were consolidated, and a new 1% loan was obtained while NHA structured a creative financing plan for a joint refunding with the City of Watsonville. Two rating upgrades were obtained in a two-year period.
Executive Summary: For two years, NHA Advisors worked with the Agency to implement new reserve policies and start the process for a Prop. 218 water rate increase. With the new reserve policies in place, NHA structured the refunding and consolidation of three existing debts (a COP and two SRF loans). NHA’s developed an in‐person rating presentation that focused on the Agency’s improving finances, new reserve policies, experienced management, and other credit positives. Even though the Prop. 218 water rate increase had yet to be approved by voters, the presentation convinced S&P to upgrade the Agency’s rating from “BBB+” to “A‐,” resulting in nearly $3.5 million of savings (approximately $250,000 annually) from the refunding.
The following year, now with the rate increase in place, NHA structured the refunding of a debt that was originally issued by the City of Watsonville on behalf of the Agency. Debt service was scheduled to increase dramatically in the following fiscal year, and the Agency was paying a sizeable annual administration fee to Watsonville that could be eliminated. Concurrent with the refunding, NHA helped the Agency gain approval for a 30‐year, 1% State Water Resources Control Board loan. NHA’s presentation to S&P demonstrated that the Agency would still have ample coverage and reserves to absorb the additional $1,000,000/year of “new” debt from the refunding and SWRCB loan, resulting in a second rating upgrade from “A‐” to “A.” Using grants, reimbursements, the original reserve fund, and lower interest rates, NHA was able to help the Agency reduce annual payments from approximately $2.2 million to $800,000, saving the Agency more than $27 million over the remaining life of the bonds.