After waiting a week, the city of Missoula learned Tuesday that its revenue bonds for the water system received an A+ rating from Standard & Poors.
As a result, the city said, it will save roughly $1 million in interest payments over the 25-year life of the new bonds. The City Council unanimously approved the refinancing package on Monday night.
“S&P said the rating includes the combination of a very strong enterprise risk profile and a strong financial risk profile, and that the city has met or exceeded most of its operational and financial goals since purchasing the water system 20 months ago,” Ginny Merriam, the city’s communications director, said in a statement issued Tuesday.
In 2017, the city entered into two bond anticipation notes to fund the purchase of Mountain Water and to cover any possible liabilities as the acquisition played out in the courts.
Both notes were callable, allowing the city to redeem and retire the old bonds and issue long-term debt at a better and more predictable rate.
The bonds, which come with a fixed interest rate, total roughly $94.7 million and will replace the short-term bonds the city initially used to purchase Mountain Water Co. The rating reflects S&P’s confidence in the city’s operation and management of the water system.
“The city has demonstrated it has the ability and willingness to meet its financial obligations in full and on time,” Merriam said.
When the city acquired Mountain Water, the system had a leakage rate of more than 50 percent. The city’s master plan looks to invest $37.2 million in system improvements by 2024.
Last year, the city’s first full year of ownership, the system delivered 4.2 billion gallons of water through 337 miles of water mains. The city plans to replace 30 percent of the pipe that contributes most to water leakage.
When issuing its rating, S&P said “the outlook is stable.”
As approved Monday, the 2019 Series A bonds are expected to close on April 1. The public sale of the bonds will start with Missoula customers, followed by Montana customers and out-of-state investors.