The Watauga River Regional Water Authority has received an “A” bond rating for their ongoing water treatment plant project on Watauga Lake. WRRWA’s Board of Directors learned about the decision at Tuesday’s meeting at the Workforce Development Complex.
Project Engineer Doug Unger of Jacobs, Inc. updated the board members on the current status of construction work and the bond rating as part of his monthly report. Over the last week, Unger has been working with the bond rating agency to finalize the necessary steps to obtain the project’s bond rating. On Tuesday, Unger was notified that WRRWA has received a bond rating of “A” for the water treatment project. “That is very good,” said Unger. “It speaks very well of Watauga Water Authority. The bond agency did not just look at Watauga because we are a wholesaler. They looked at the project’s partners to reach their decision on a bond rating.”
Unger said the rating will have a positive impact on multiple levels. He explained the decision will make the bonds more attractive to potential buyers on the primary and secondary bond markets.
For WRRWA, a higher bond rating translates to a lower interest rate and reduced costs for repaying the bonds. Unger stated the original figures indicated the authority would be able to obtain an average interest rate near 5.5 percent. Unger and Elizabethton Mayor Curt Alexander estimated an “A” bond rating will likely translate to an interest rate near 3.5 percent.
A final decision on the water treatment plant’s interest rate is scheduled to be released to WRRWA on Wednesday. “No matter what the final interest rate is set at, we know we’re going to be much better off than our original projections,” Unger said.
Mayor Alexander, who serves on the WRRWA Board of Directors, said he was pleasantly surprised at the final bond rating. “An ‘A’ rating is better than what I thought it would be since there is no real credit history or background. I guess what they based their decision on is the people who are buying the water. This rating is very good for a start-up,” said Alexander.
Alexander added, “You can look at this decision as something of a double-edged sword. If you’re an investor, you’re going to hope the bond rating was actually a little lower so you can get more yield from the investment. If you’re the water authority, however, you want that rating to be higher so you can get a better interest rate and pay less on your debt service.”
Unger said a tentative date of July 30 has been set for final bond closing on the bond issue. If WRRWA is able to close on the matter by July 30, the $8.2 million in project bonds are expected to go on the market by July 31.
In regards to the project’s current completion level, Unger said nearly $11.9 million of the estimated funding for the treatment plant. He noted the construction project presently stands at a completion rate of 82.92 percent.
WRRWA is still anticipating that the plant will begin pumping water to customers with temporary pumping units in the City of Elizabethton, as well as the Siam and North Elizabethton Utility Districts by October. WRRWA Interim Director Bryon Trantham has already begun discussions with Kingsport-based Rain-4-Rent to obtain the temporary pumps for the treatment plant.
The authority’s Fish Springs/Little Milligan Water Project is also nearing completion. Trantham updated the board Tuesday afternoon on the construction status. Trantham stated that work has been completely finished on tank installation at the work site. He added the tank presently has around seven to eight feet of water already in storage.
Trantham also noted, “All the lines have been pressure-tested. We started flushing the system (Tuesday) afternoon. We are probably going to begin bacterial and biological sampling on Wednesday.” Once the sampling has been completed, Trantham explained that they will start to set water meters along the system.
WRRWA has publicly stated they believe the Fish Springs/Little Milligan Water System will be online and operational within the next three weeks. “We’re hoping and praying the system will be ready to go by the beginning of August,” Trantham said. He added the only possible delay in the Aug. 1 date could be created by obtaining additional equipment to finish the project.
In other business, the board agreed to a request by the water authority’s accountant, Frank McDaniel, to write-off approximately $74,000 in bad debt from non-payment by former customers. Trantham said approximately 90 percent of the unpaid bills originated during the time when WRRWA operated as a co-op and customers were often allowed to accumulate bills totaling several hundred dollars. The authority’s bad debts had already been sent to collection agencies for further action. McDaniel recommended the move in order to balance WRRWA’s books for future audits.