Grover Beach council approves $5 million private placement to fund wastewater upgrades

A majority of the Grover Beach City Council voted Sept. 8 to authorize a private placement of up to $5 million to finance required wastewater infrastructure, after advisors said the structure offered lower costs than a public offering.

Albert Pesche, the city’s municipal advisor, and Renee of Piper Sandler described a solicitation to 28 banks that produced six bids. They recommended a 20-year direct placement with Webster Bank, which offered the lowest locked tax-exempt rate at 4.425% and favorable terms including an optional redemption feature. Pesche said the advisory team recommended the private placement because it avoided the rating, disclosure and ongoing continuing disclosure burdens of a public sale and produced a more attractive all-in rate for the city.

Bond counsel Cyrus Tarabi (QTAC Rock) said the obligation will be payable solely from wastewater enterprise revenues; no general fund, water enterprise or other city funds are pledged. The financing documents include a covenant requiring the city to set wastewater rates and charges annually at 120% of debt service (a standard covenant to protect bondholders). Tarabi warned that if the obligation were to lose tax-exempt status the interest rate would increase (the presentation referenced a taxable rate near 6% and higher contractual default rates thereafter).

City advisors reported an estimated par amount of about $4,940,000, estimated annual debt service of roughly $380,000, an estimated total debt service of about $7.5 million over the amortization period, and cost-of-issuance expenses near $138,000 (about 2.8% of par). The consultants said closing was planned for late September after finalizing legal documents.

A councilmember moved to adopt the resolution authorizing execution and delivery of the installment purchase contract and related documents for the private placement; a second was recorded and the council approved the resolution by roll call (all voting "Yes" in the transcript). Staff said the proceeds would be wired to the city and used to accept construction bids and proceed with the wastewater project.

The presentation and vote followed questions about the winning bank’s experience, market dynamics that attracted multiple bids, and the legal protections in the documents. The council did not receive public comment on the financing item before moving to deliberation and vote.