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City Utilities Receive Solid Bond Ratings

City Utilities Receive Solid Bond Ratings
Jan. 30, 2015

Gwen Schuler, Media and Communications, gschuler@cityoftacoma.org, (253) 591-5160
Megan Snow, Media and Communications, mmarquett@cityoftacoma.org, (253) 591-5051

City of Tacoma’s Solid Waste and Sewer Utilities Receive Solid Bond Ratings

The City of Tacoma’s Solid Waste and Wastewater and Surface Water Utilities were recently evaluated by all three credit rating agencies, which reaffirmed or upgraded the City’s ratings this week in preparation of a planned sale of bonds.

“This strong bond rating from all three agencies demonstrates that the city's environmental services utilities are responsibly managed both operationally and financially,” Mayor Marilyn Strickland said. “It highlights the expertise of our staff that ultimately benefits our customers.”

Standard and Poor’s Rating Service and Fitch Ratings both reaffirmed the City’s ratings. The utilities received an AA rating for solid waste and an AA+ rating for wastewater and surface water from Standard and Poor’s; and an AA- and AA+ respectively from Fitch.

Moody’s announced earlier this week that they upgraded the City’s solid waste rating to A1 from A2 and reaffirmed the wastewater and surface water rating of Aa2. The upgraded rating means the City’s Environmental Services Department and its customers will save a half a percent on the interest rate for the new bonds, which in current markets would be approximately a $100,000 savings on interest, according to Michael P. Slevin, Environmental Services Director.

The credit rating agencies supported the City’s ratings based on consistently strong debt service coverage and healthy liquidity; strong economic base with diversity in both the employment and customer bases, and good income levels; and excellent management of the utilities. Other factors such as having addressed all known environmental issues, investments in plant assets, separate storm and wastewater streams, and garbage flow control also supported the strong ratings.

The negotiation of the sale of the bonds is expected to be completed in February. Wastewater and surface water bonds will provide $70 million in capital to be used primarily for replacing the City’s aging sewer and storm lines. The solid waste “green” bonds will raise $22 million for capital improvements, which include the purchase of new hydraulic hybrid collection trucks.

The new collection trucks are estimated to reduce diesel use by 40 percent per truck. The more fuel efficient trucks will save money and reduce emissions, shrinking the City’s carbon footprint and protecting the environment.

The City also plans to refinance the 2006 bonds for wastewater and surface water to achieve a savings of approximately $5 million by taking advantage of lower interest rates. The City may refund a portion of the solid waste 2006 bonds, which funded construction of the Recovery and Transfer Building, using the new A1 rating from Moody’s, yet that decision has not yet been made. The bond sale ordinances passed by the City Council on Jan. 13 currently allows refinancing options depending on market conditions.