Pasco completes $14.38 million bond sale for water, sewer improvements

The city of Pasco has paid off $4.15 million in old debt and is left with $10.5 million to cover several water and sewer projects after selling revenue bonds.

The $14.38 million bond sale closed Dec. 22, Deputy City Manager Stan Strebel told City Council members Monday night.

“The sale went very smoothly and everything was as expected,” he said.

Pasco saved $407,645 by clearing out three separate bonds issued in 2002, 2005 and 2007, instead of prolonging the payments over the normal 20 years.

Those bonds, like the 2015 sale, were used exclusively to upgrade portions of the city’s water and sewer system or make general repairs.

The city, which has a Standard & Poor’s credit rating of AA-, was able to secure a low 3.71 percent interest rate.

Strebel explained that a bond essentially is the same thing as a mortgage is for a private individual. When a city sells bonds, it is like taking out many different mortgages with pledges to pay back the bond holders over a period of time, he said.

Pasco officials recognized that they should take advantage of the lower rates and borrow the money now “so we save ourselves the higher interest payments on outstanding debt,” Strebel said.

However, Pasco opted not to try and pay off a 2009 bond at this time, he said.

“When you’re financing things for the public, you need to take a little bit different approach than an individual may take,” said Strebel, explaining that a homeowner may refinance their mortgage with a 15-year loan to pay it off as quickly as possible and become debt free.

“You need to remember that as a city is growing, you have new users coming in and they’re taking advantage of the systems that have been in place,” he added. “So it’s not necessarily reasonable for the citizens in the first 15 years of the life of say a 50-year facility to pay the full costs, and for the people that use it for the remaining 35 years to get it at no cost.”

Pasco borrowed in this case to complete some larger projects that the public won’t necessarily see happening. A large portion of this money will go toward replacing the water and sewer lines along Oregon Avenue during reconstruction later this year and in 2017, Strebel said.

Extra costs to issue the bonds and pay the lawyers and underwriters came in at $142,360.

This story was originally published January 25, 2016 at 10:30 PM with the headline "Pasco completes $14.38 million bond sale for water, sewer improvements."