PHILADELPHIA – The City of Philadelphia has completed a $250.7 million Water & Wastewater Revenue Bond issuance that allowed the City to borrow money to complete crucial system-wide infrastructure investments.

This transaction was achieved with historically low interest rates, helping the City deliver necessary improvements to Philadelphia Water Department (PWD) rate payers at a lower cost. By achieving rates 0.6% less than the most recent Water & Wastewater Revenue borrowing, the City was able to save $14 million dollars in relative costs. Lower interest rates were tied to exceptional demand for Philadelphia bonds, with total retail and institutional investments exceeding $600 million (about two and a half times the amount of bonds issued).

“The continued strength of PWD’s financial management increased investor demand for their bond leading to the historically low interest rates achieved on this transaction,” City Treasurer Christian Dunbar said. “This means our borrowing costs are lower — and that saves rate payer dollars.”

The Water & Wastewater Revenue credit is the highest rated in the City of Philadelphia. In advance of the sale, the City received confirmation of its existing bond ratings from each of the three rating agencies. Moody’s Investors Service affirmed its ‘A1’ rating on the City of Philadelphia’s Water & Wastewater Revenue Bonds. Fitch Ratings and S&P Global Ratings also maintained their stable outlooks and ‘A+’ ratings. All three agencies cited the PWD’s strong financial and operational management, broad and diverse service base, and robust system capacity. Moody’s noted, “The department’s years of operating stability reflect strong budget and planning protocols, which we expect will continue as the department progresses in its capital improvement plans.”

“Strong credit ratings allow the Water Department to continue its essential investment in our facilities and in our over 6,000 mile network of pipes to ensure the reliability of top quality service by replacing water and wastewater infrastructure that has reached the end of its useful life,” said Water Commissioner Randy E. Hayman. “This assures our long tradition of exceeding regulatory requirements while balancing costs with affordability.”

The 2019B bonds were sold by an underwriting syndicate led by Goldman Sachs, with Siebert Cisneros Shank & Co., LLC. serving as co-senior manager. The sale will close on August 14, 2019.

This borrowing comes shortly after the City also achieved historically low interest rates in a General Obligation bond issuance, allowing it to borrow money for crucial investments such as streets, parks and recreation facilities, and police facilities at less cost to taxpayers. Rates for that $293.4 million borrowing were about 0.63% lower than rates on the City’s last General Obligation borrowing, meaning the City’s costs were approximately $15.9 million lower on the earlier transaction.

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Note about Series 2019B Bonds: The Series 2019B Bonds’ borrowing yields represented a spread to the MMD index, an industry accepted tax-exempt benchmark of yield on the strongest rated AAA credits, of 0.53% for the 35-year maturity, which is 0.10% improvement than that achieved in a comparable new money bond sale in 2018. The overall all-in true interest cost was 3.628% on the Bond issue, and the transaction was structured with maturities from November 1, 2023 to November 1, 2054.