FORT SMITH -- The city will save about $9 million in bond debt payments by refinancing revenue bonds that were issued 10 years ago.
The refinancing of $67 million in Series 2008 bonds was part of a $160 million bond ordinance city directors passed Tuesday night that also called for issuing $82 million in new bonds to raise money for continued work on the city's water and wastewater systems.
The remaining $11 million in bonds is for premiums, reserves, or to meet changes in bond pricing before they are issued, according to a memorandum by Deputy City Administrator Jeff Dingman.
S&P Global informed city officials earlier this month that Fort Smith's bond rating was improved from A- to A, reflecting low risk, good debt service coverage and strong liquidity levels over the past five years.
"Based on our financial management assessment, we view Fort Smith to be a '2' on a six-point scale, with '1' being the strongest," S&P Global wrote in its July 12 rating.
The S&P noted the $160 million bond debt could put pressure on the city's system rates, liquidity and coverage levels but the impact may not be felt for a few years.
Revenue from the $82 million in bonds will pay for wastewater system improvements required under a 2015 federal consent decree with the U.S. Environmental Protection Agency, the Department of Justice and the Arkansas Department of Environmental Quality, to which the city agreed to resolve violations of the federal Clean Water Act.
City officials estimate it will cost about $480 million over 12 years to make the necessary improvements. The city is relying on revenue from steep increases in customer sewer rates to pay for the work.
City directors voted to raise residential customer sewer rates by 64 percent in 2015, by 35 percent in 2016 and by 19 percent last year to generate the revenue to meet the consent decree costs.
The consent decree work includes repairing and replacing parts of the wastewater collection system to eliminate water infiltration and inflow, making improvements to the P Street Wastewater Treatment Plant, establishing a routine assessment of the conditions of the sewer lines, building and improving pump stations, improving technology, initiating a maintenance regimen, and requiring elimination of fats, grease and oils from private lines as a way to stop system overflows.
The bond revenue also will pay for improvements to the water and wastewater system that are not required under the consent decree.
That work will include making improvements to the city's Massard Wastewater Treatment Plant; equipment replacement at the Lee Creek and Lake Fort Smith water treatment plants; and water distribution system repair, rehabilitation, replacement and improvements, along with equipment maintenance.
State Desk on 07/25/2018