Fairfax Water conducted a successful municipal bond sale on July 9th, raising $60 million for necessary infrastructure renewal projects over the next two years.
The bonds were sold via a competitive auction process. The bonds were purchased by Wells Fargo Bank, N.A., who submitted the winning bid with a true interest cost of 3.98%. During the auction, eight competing banks submitted a total of 28 bids. Between the initial high bid submitted and the final winning bid, Fairfax Water’s total debt service cost decreased by $3.2 million. The strong pricing outcome reflects the attractiveness of Fairfax Water’s bonds.
Fairfax Water has been rated AAA by all three major rating agencies since 2003. As of August 2020, Fairfax Water is one of four water-only utilities nationwide rated AAA. Municipal bonds are debt securities issued by states, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects.
AAA is the highest possible rating that may be assigned to bonds by any of the major credit rating agencies. AAA-rated bonds have a high degree of creditworthiness because their issuers are easily able to meet financial commitments and have the lowest risk of default.
“Obtaining AAA ratings from all three credit ratings agencies for over 20 years is an important distinction, representing the consistency of Fairfax Water’s sound financial management”, said Fairfax Water Board Chairman Philip W. Allin. “These ratings ensure that the latest bond sale is at the lowest financing rates, which translates to lower rate increases for customers.”
Key rating considerations
In affirming Fairfax Water’s rating, ratings agencies S&P and Moody’s identified several factors contributing to the authority’s creditworthiness, noting management’s ability to maintain strong financial metrics while planning and managing for a significant water supply and treatment capacity.