Tacoma Power seeks up to $325 million in 2025 bond financing; committee forwards plan to council

Tacoma Power told the City of Tacoma’s Government Performance & Finance Committee on April 1 that it plans to issue up to $325 million in bonds in 2025 to finance capital projects and to refinance older debt.

"We are requesting to issue around $135,000,000 in new-money bonds to finance our capital needs of the utility and up to $190,000,000 in refunding bonds if there is a savings," said Michelle Brown, financial planning manager for Tacoma Power. She told the committee the refunding portion is contingent on market conditions at pricing day.

The proposal calls for three main elements: issuing roughly $135 million of new-money bonds to fund planned capital projects; up to $190 million of refunding bonds if pricing produces savings, for a combined authorization of up to $325 million; and redeeming the city’s 2010 Clean Renewable Energy Bonds (CREBs) with roughly $26 million in cash to avoid a large near-term debt-service spike. Brown said Tacoma Power also plans to use about $50 million of operating cash to reduce annual debt service related to Build America Bonds (BABs), for a total planned cash use of approximately $75 million.

The utility said it intends to issue a portion of the sale as green bonds to fund eligible capital projects and expects to price bonds in June with a target close in July. "We plan to pay off the whole $26,000,000 in debt service due with cash," Brown said regarding the CREBs. She added the refinancing elements are dependent on market prices on the day Tacoma Power prices the bonds.

Bond counsel Deanna Gregory of Pacifica Law Group and financial advisers Montague DeRose and Associates are part of the financing team; Ying Hall, Tacoma Power planning and analysis manager, also attended the briefing. City staff said the underwriting team was selected through a competitive process to widen investor reach and improve pricing.

Committee members asked about tax and refunding implications. Pacifica Law Group clarified the planned transactions would be current refundings, not advance refundings, and that redeeming the CREBs would be done with available revenues rather than issuing new bonds to pay them off. Counsel also warned that proposed federal changes to the tax treatment of municipal bonds are under discussion; if law changes are enacted without retroactive effect, bonds issued before any change would keep the tax characteristics determined at pricing.

Under Washington law, the committee was told the City Council may delegate final approval of the bond sale to designated city officers to allow flexibility in timing. The draft resolution requests authorization for the director of power and the superintendent to serve as designated representatives to conduct the sale between authorization and year end.

The committee voted to forward the proposal to the City Council for consideration. The committee recorded the motion to forward Tacoma Power’s financing transactions, the motion was seconded, and members present voted to approve the motion. The committee indicated it will take the item to City Council on April 15 for final action.

If priced and closed as proposed, Tacoma Power said the bond issuance will be used to spread the cost of long-lived capital assets over time and to smooth projected debt-service spikes that could otherwise press on retail rates.