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PFM outlines options to expand borrowing capacity for $5.8 billion CIP
Summary
Financial adviser PFM briefed the Trust on options — expanding commercial paper, extendable commercial paper, bank notes, and continued long-term borrowing — to fund a multibillion-dollar capital improvement program.
The Trust received a briefing from Dennis Whiteley of PFM, the city’s financial adviser, on Jan. 28 about financing options to support Oklahoma City’s multi-year capital improvement program (CIP).
Whiteley told trustees the utility’s CIP totals roughly $2.7 billion over five years and about $5.8 billion over 10 years, citing major projects such as the Atoka pipeline (about $560 million) and the Deer Creek project (about $130 million). He described the current debt structure (senior lien revenue bonds and junior-lien water board loans), noted a previously amended indenture that removed the need for a debt service reserve fund and affirmed the utility’s AAA rating, and said the current rate adjustments keep the utility’s coverage and cash on hand within policy through 2029.
To increase short-term appropriation capacity, Whiteley presented several options: expand the commercial paper (CP) program from the current $350 million up to $500 million; evaluate extendable commercial paper (ECP) as an appropriation-only tool (not intended for cash borrowing); consider a bank note program (which may carry fees for unused portions and had limited historical bank appetite); and continue issuing long-term fixed-rate bonds and using Oklahoma Water Resources Board loans for longer-term financing.
Whiteley said the CP expansion would be the most straightforward near-term approach and that ECP could provide appropriation capacity without ongoing fees, though it would have a smaller buyer market and remarketing risk. He said bank notes were a potentially viable but more expensive option and that the utility now has significant appropriation already outstanding under CP authorization (about $262 million appropriated but unspent, plus roughly $37 million reserved for pipeline purchase orders).
Trustees asked whether any recommended changes would be evaluated against current policy and coverage ratios; Whiteley said he would return with recommendations and analysis of policy impacts and debt-coverage effects.
Whiteley concluded with a market update: rates remain higher than the 10-year average and the yield curve is relatively flat, making shorter call features desirable on new long-term debt if market conditions allow.
