Council Approves Strategic Bond Issuance, Bond Sale Moving Forward for Critical Water Infrastructure Improvements
October 16, 2024 - At the September 17, 2024 regular meeting, the City Council unanimously adopted Ordinance No. 24-09 which authorizes the issuance of bonds to fund critical improvements to the City's water utility infrastructure. Financing this work through bonds allows the City to spread out the cost of these projects over time, maintaining smooth year-over-year utility rate adjustments for customers and ensuring residents now, and in the future, equitably share in paying for the costs of these long-lived investments.
The City is moving forward with the bond sale. The ordinance authorizes the issuance of one or more series of Limited Tax General Obligation (LTGO) and refunding bonds, with an aggregate principal amount not to exceed $29 million.
On October 3, City officials presented the City’s overall financial position to the credit rating agency, Moody’s Ratings. On October 14, Moody’s affirmed the City’s Aaa credit rating, the highest possible credit rating for a local government, signaling Mercer Island’s strong capacity to meet its financial commitments.
The bond sale is tentatively scheduled for the week of October 21, 2024, with bond closing and delivery of proceeds expected around November 7, 2024. The final secured rate will be confirmed after the competitive sale process is complete, with a final maturity date no later than December 1, 2045.
Much of the Island's water infrastructure is aging and in need of replacement, which is underway or planned through several major capital projects. The proceeds from these bonds will fund critical upgrades to the water distribution system, including water reservoir improvements, water main replacements, and advanced metering infrastructure implementation.
"This approach allows us to make critical investments in our water system while being mindful of the long-term financial implications for our community," City Manager Jessi Bon, said. “Our water system needs to be modernized and strengthened - these bonds are the best way to ensure we can make the improvements needed and fund them equitably for all Islanders.”
The timing of the bond issuance is guided by financial strategy, allowing the City to best leverage improved rates and market conditions.
"In May, we recommended delaying our planned bond issuance,” Finance Director Matthew Mornick, said. “This decision has positioned us to potentially benefit from more favorable market conditions, which could result in significant savings for our taxpayers over the life of these bonds."
Recent market shifts, including the Federal Reserve's September 18 decision to lower interest rates, may result in a more favorable borrowing environment in the coming weeks. The City’s Finance Department is closely monitoring market dynamics and coordinating with financial advisors to determine the optimal timing for the bond sale.
The City of Mercer Island remains committed to transparent and responsible financial management and will provide updates on the outcomes of this process as they are available. You can learn more about the City’s Finance Department on the department's webpage.
