Bond refinancing will save Portland sewer ratepayers millions

The City of Portland is cashing in on lower interest rates to reduce debt payments and save money for sewer ratepayers. Portland’s Public Finance and Treasury Division announced today that the city has completed refinancing sewer construction bonds in a deal that will reduce future city debt payments by more than $48 million.

The city issued $393.1 million of new bonds to retire $425.5 million of outstanding bonds. The deal refinanced bonds the city issued in 2004, 2005 and 2006. The 2004 and 2005 bond issues refinanced previously-issued bonds. The 2006 bond issue financed Bureau of Environmental Services sewer construction projects, including part of the East Side Big Pipe project that controls combined sewer overflows to the Willamette River.

“Much like wise homeowners seize the opportunity to refinance houses when interest rates drop, the city took advantage of lower market interest rates to save money for Portland ratepayers,” said City Treasurer Jennifer Cooperman.

“This refinancing produces significant cost savings to ratepayers and supports our continuing efforts to minimize costs,” said Environmental Services Director Mike Jordan. “Reducing these required debt payments also gives us financial flexibility as we plan for the future.”

The city issued two bond series. Moody’s/S&P rated Series A at Aa2/AA. Six underwriters bid on those bonds and Wells Fargo submitting the winning bid. Moody’s/S&P rated Series B at Aa3/AA-. Seven underwriters bid on those bonds and Bank of America Merrill Lynch submitted the winning bid.

The new combined average interest cost is 2.31% compared to the old rate of more than 4.25%. The deal will result in debt savings to the city of $48 million over the next 16 years, through June 1, 2031. The largest savings will occur from fiscal year 2020-21 through fiscal year 2022-23.