Hot Springs approves up to $72.5 million wastewater revenue bonds; emergency clause adopted

The City of Hot Springs Board of Directors on March 10 authorized the issuance of up to $72.5 million in wastewater revenue bonds to finance improvements to the city’s wastewater treatment plant, gravity mains, force mains and pump stations, and approved an emergency clause to make the ordinance effective immediately.

At a public hearing that drew no speakers, Karen Scott, the city’s finance director, told the board the bonds could be issued in one or more series in a maximum principal amount of $72,500,000 and that the city may provide a debt-service reserve up to $7,250,000 in the form of a surety bond or insurance policy. Scott said final principal and interest requirements will be available after sale closing; officials expect the transaction to close April 15.

The ordinance followed a presentation by Bob Wright of Cruz & Associates, the city’s municipal advisor, who credited Stevens Inc., the underwriter, with winning a heavily oversubscribed sale and securing an overall borrowing cost of about 4.84 percent — lower than the roughly 5.13 percent projected in February. Wright said that difference produced an estimated $6,770,000 in savings versus the earlier projection. “They did a very good job,” Wright said of the underwriter’s marketing and execution.

Wright and city staff said the strong demand included large institutional orders and retail participation: the underwriting packet listed institutional interest well above the roughly $70 million offering and retail orders (smaller, individual investors) totaling about $5,105,000.

Board members asked whether the lower borrowing cost will affect customer rates. Wright and staff said the pricing gives the city flexibility; the lower cost reduces annual debt service by “a couple hundred thousand dollars” relative to the previous projection, which can lessen the amount the utility needs to collect from ratepayers. Staff also noted the bonds include a five-year call provision that could allow future refinancing if market rates fall.

The board adopted Ordinance O-25-07 by roll call (Director Marsha Dobb Smith, Director Karen Garcia, Director Steve Trustee, Director Erin Holiday, Director Phyllis Beard and Mayor Pat McCabe voted Aye). The board then approved the ordinance’s emergency clause by roll call, making the borrowing authority effective immediately.

Votes at a glance - Ordinance O-25-07 (wastewater revenue bonds, maximum aggregate principal $72,500,000): adopted (Ayes: Dobb Smith; Garcia; Trustee; Holiday; Beard; Mayor McCabe). Emergency clause: adopted. - Resolution R-24-235 (declare structure at 234 Garden St. a nuisance and condemn): motion to condemn failed (see separate item). - Resolution R-25-45 (purchase of city vehicles from state contract): adopted (see staff breakdown).

Why it matters: City officials said the bond proceeds are required to comply with a consent order from the Arkansas Department of Environmental Quality (ADEQ) and to complete mandated wastewater upgrades. The lower-than-expected borrowing cost reduces the near-term debt-service burden on utility customers and gives the city flexibility for future rate decisions.

What’s next: City staff said the bonds will close in mid-April and construction and improvements will continue once funds are available.