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Brighton plans $85 million bond sale to finish water treatment plant; S&P rating downgraded slightly
Summary
City finance staff and advisors gave a timeline for a 2025 bond sale to fund the Brighton water treatment plant, explained why S&P lowered the city's utility bond rating to AA- and outlined steps including public hearings, rating calls and a February sale window.
Brighton finance staff and municipal advisors told city leaders at a Jan. 14 study session they plan to issue about $85 million in bonds in early 2025 to continue construction of a new water treatment plant set to be online in 2027.
Finance Director Katrina Asher and Hilltop Securities senior managing director Jason Simmons reviewed how the project has been funded so far: the city used its full ARPA allocation of $10.4 million and issued $80 million in bonds in 2022; about $68 million of the 2022 proceeds has been spent and the city plans a second bond issuance in 2025 to keep the project funded. Interest earned on bond proceeds has been returned to the project account.
Asher told council that Standard & Poor's lowered Brighton's utility bond rating from AA to AA- with a negative outlook in an annual surveillance review; S&P cited the city's reliance on development-driven revenues and a rate reduction in 2020 that reduced reserves as risk factors. Asher said the city keeps a 15-year financial plan and believes AA- remains a strong rating; she added the downgrade is a required market disclosure. Simmons said Fitch still rates the water utility higher and that the city expects to receive competitive bids and structure the sale so the project receives $85 million in proceeds.
Staff outlined the procedural steps that will come to council: a parameters bond ordinance (setting maximums for par, interest rate and final maturity) to be introduced next week, rating calls with Fitch and S&P later in January, and a competitive sale targeted for mid-February with closing soon after. Simmons said the ordinance will allow a maximum par authorization up to $86 million to ensure $85 million of net project proceeds and set a maximum interest rate of 5.25 percent and a final maturity up to 30 years; current market expectations were cited near 4.75 percent.
Asher warned council that the water and wastewater funds will carry a large debt burden and that any future borrowing will require rate increases to cover new debt service; the city currently plans no additional borrowings in the 15-year plan. Council members asked technical questions about premiums on municipal bonds, the competitive sale process and advisor fees; Hilltop said advisors are paid a capped fee from transaction proceeds.
No vote was taken at the study session; staff will present the ordinance for consideration on the regular agenda and seek approval for the competitive sale process and the parameters ordinance.
