Yuma, Arizona - In December, the City sold $71 million in utility system revenue obligations to fund improvements to its sewer system plant, increasing wastewater capacity at the Desert Dunes Reclamation Facility to 3.3 million gallons per day. The City Council identified the expansion of the facility as a priority in the City’s adopted Strategic Plan. The City was able to secure a competitive interest rate of 2.26 percent.
“We are very excited to see the community reach this milestone,” said Director of Utilities Jeremy McCall. “This expansion represents the continued growth, investment, and development within the City. Once the expansion is completed, the treatment facility will be able to serve the future requirements of our thriving community.”
The City engaged Stifel, Nicolaus & Company as underwriter to assist with the obligation sale, the same underwriter used to finance the City’s Public Safety Personnel Retirement System debt in January 2021.
When corporations and governments issue bonds, they receive a credit rating from the three major rating agencies: Standard & Poor’s, Moody’s, and/or Fitch. In December, Yuma’s long-term rating was upgraded to AA- from A+ by Standard & Poor’s and affirmed at AA- by Fitch. The improved bond rating reflects a positive view of the City’s current finances, management and debt, including robust population and GDP growth in the Yuma economy, moderate utility rates that were held flat in fiscal years 2021 and 2022, history of strong debt service coverage and exceptional liquidity.
Pricing on one of the last days before the winter holiday, the City’s obligations were well received and generated high demand, which resulted in lower interest rates during the bond sale process. Recognizing the volatility of current interest rates, the City and their underwriter moved quickly to secure a competitive interest rate of 2.26 percent. The City had anticipated a higher interest rate. Over a 20-year period, this lower rate results in an estimated present-value savings of $462,000.
“It is great work by City staff over the past year to manage finances and by the City Council to prioritize strategic investments during a low interest rate cycle,” explained Mayor Douglas Nicholls. “Ultimately, the people of Yuma's tax dollars will produce the greatest impact to keep our community growing and open to future opportunities.”