FOR IMMEDIATE RELEASE
January 9, 2014
Contact: Mike Kanarick
802.735.7962
Mayor Miro Weinberger, State Treasurer Beth Pearce, and Vermont Municipal Bond Bank Leadership Announce
$14.6M City of Burlington Wastewater Bond Refinancing
Transaction Addresses Long-Standing Unfunded Liability, Will Save Burlington $4.8M in Interest Payments, and Signals City’s Improved Financial Management
Burlington, VT – Mayor Miro Weinberger, Vermont State Treasurer Beth Pearce, and leadership from the Vermont Municipal Bond Bank (VMBB) today announced at a news conference at the City of Burlington’s Main Wastewater Treatment Plant that the City and the VMBB closed on the refinancing of a $14.6 million wastewater bond. The transaction addresses a long-standing unfunded liability, will save Burlington ratepayers approximately $4.8 million in interest payments over the next 20 years, and signals the State of Vermont’s recognition of the City’s improved financial management.
“I am very pleased to announce that Burlington has completed its first-ever bond sale through the Vermont Municipal Bond Bank Bond general bond pool,” said Mayor Weinberger. “Not only does this collaboration constitute a cost-saving solution to another concerning financial issue inherited by this Administration, but also it represents a significant vote of confidence by the VMBB in the current financial direction of the City. I’d like to thank the Shumlin Administration, Treasurer Beth Pearce, and the VMBB for recognizing the real progress Burlington has made and for working with us to accomplish this important transaction.”
The VMBB, created in 1970, provides Vermont municipalities, school districts, and fire districts with access to long-term bond financing. The VMBB is highly rated and, therefore, able to access very low interest rates, which result in cost-effective borrowing opportunities for municipalities. The VMBB has issued loans totaling more than $1.7 billion for Vermont municipal capital projects.
State Treasurer Beth Pearce said: “As a member of the Vermont Municipal Bond Bank’s Board, I am pleased to assist with this type of financing that will reduce costs for Burlington’s residents and businesses. Burlington is making use of a proactive and prudent financing approach that adds value to the community.”
During a Burlington Special City Meeting (election) in June 1988, the voters approved both a $13 million grant and a $26 million loan from the State of Vermont and authorized the issuance of revenue bonds in an amount not to exceed $26 million to repay the loan. In 1990 and 1992, the City issued two Series of Wastewater System Revenue Bonds in the original principal amounts of $5.38 million and $15.45 million (subsequently increased to $19.4 million), respectively. The 1990 and 1992 Series Bonds were issued through the Vermont State Revolving Fund (SRF), co-managed by the Vermont Agency of Natural Resources and the VMBB. The funds were used to finance and carry out capital improvements to the City’s wastewater system, including a Lake Champlain pollution abatement project.
Thereafter, the 1990 Series Bonds were paid in full during fiscal year 2010. The 1992 Series Bonds, with the outstanding principal amount of $14.6 million, were due and payable this month, January 2014. To satisfy the 1992 Series Bonds obligation due this month, the City entered into a transaction with the VMBB, which closed on Tuesday and includes the following terms: $14.6 million loan principal; 3.853% Net Interest Rate on the loan; and a 20-year term for the loan.
John Valente, VMBB Chair of the Board of Directors, who was unable to attend the event, stated: “For the past 44 years, the Bond Bank has been pleased to provide a means of lower-cost financing for cities, towns, school districts, and other public bodies throughout Vermont. Our recent bond offering is an example of the bank achieving its goal to responsibly foster and promote access to capital markets for the financing of public improvements.”
Robert Giroux, VMBB Executive Director and Secretary, who participated in today’s announcement at Burlington’s Lavalley Lane Wastewater Treatment Plant, added: “The City’s SRF loan was eligible for refinancing through the VMBB, and its application was well received by the Board. Burlington appears to be taking the right steps to correct its financial situation. Repayment of the City’s loan will be backed by a revenue pledge of the Water and Wastewater Division of Burlington’s Department of Public Works. Because of the size of the VMBB’s loan pool, Burlington’s loan will neither impact the underlying credit quality of the loan pool, nor jeopardize the VMBB’s credit rating.”
Had the City been unable to secure refinancing through the VMBB, the alternative funding sources likely would have included private placement at an interest rate of approximately 6.00%. This increased rate would have cost the City approximately $4.8 million more than the VMBB deal.
Burlington Chief Administrative Officer Bob Rusten, Assistant CAO Richard Goodwin, and Department of Public Works (DPW) Assistant Director for Water Quality Laurie Adams also participated in the news event.
“From our initial conversation with State Treasurer Beth Pearce through the many discussions with Bob Giroux and members of his team at the Bond Bank, it was gratifying to hear that they recognized the City’s efforts to stabilize its finances and believed in our ability to meet the requirements of the loan,” said CAO Rusten. “They did their due diligence to verify efforts, and the Bond Bank would not have approved the loan without our having met their requirements. Rich Goodwin and Laurie Adams deserve a lot of the credit for having set a path of financial stability in the Wastewater Enterprise Fund.”
Burlington has three wastewater plants that treat raw sewage. The plants are located on Riverside Avenue, North Avenue Extension, and the Main Plant on Lavalley Lane. At the plants, DPW’s Water Quality Division treats domestic and industrial sewage to stringent federal standards levels that ensure public health and the biological integrity of the waters receiving discharges from the facilities. Also, stormwater for much of the City is collected and treated at the Main Plant prior to discharge into Lake Champlain.
DPW Assistant Director Adams, stated, “This has been an excellent effort by all parties to stabilize wastewater finances for previous infrastructure upgrades that ultimately protect our most precious resource, Lake Champlain.”
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