The city of Fort Smith sold $146.5 million of bonds for water and sewer refunding and construction projects on Monday (Aug. 27) out of a previously-approved amount of up to $160 million.
In a special meeting on Tuesday (Aug. 28), the city’s Board of Directors okayed an ordinance establishing the maturity schedule and confirming the sale. The bonds will close on Sept. 13. Fort Smith City Administrator Carl Geffken told Talk Business & Politics that, as a result of the sale, the city will save $9.8 million.
“It was a very successful bond sale. PFM — Public Financial Management — was our financial advisor. Our lead underwriter was Bank of America Merrill Lynch, and the syndicate consisted of Stephens Inc., Raymond James, and Cruise and Associates. So it worked out very well. We had priority orders — those from investors and individuals — equal to $363 million. Those are priority orders, then there’s also orders for stock that underwriters like Stephens, Raymond James, and Cruise put in.” Geffken said the bond sale was a testament to the city’s strong credit rating, which improved by Standard & Poor (S&P) standards from an A- to an A since the last time bonds were sold two years ago.
Tuesday’s meeting capped a process that dates back to April when city directors approved the bond offering. A memo at the time from Deputy City Administrator Jeff Dingman stated most of the savings would come from a $67 million refunding of the Series 2008 bonds. Another $82 million of the then-estimated $160 million total would finance new water and sewer projects identified in the utilities department’s capital improvement plan, including water transmission projects and capacity and repair work required for compliance with the 12-year consent decree that expires at the end of 2026.
Remainder of the bond proceeds were to go toward “premiums, reserves, or in case estimates change slightly due to changes in bond pricing as we near the date of issuance,” Dingman wrote, adding the amount “also ensures that we do not need to start the process over should there be changes, such as if the purchase of insurance is required.”
In November, the Board approved a five-year capital improvement plan for the city’s wastewater program that will budget $153.8 million in consent decree spending from 2018 through 2022, an average of $30.76 million per year.
The consent decree mandates improvements to the city’s 500 miles of sewer lines and 23 pump stations. This does not count necessary non-consent decree improvements and maintenance, estimated at an additional $48 million over the coming five-year period.