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The Pleasanton City Council unanimously approved finance documents to allow the city to issue water revenue bonds with a principal maximum amount of $19 million, which will help pay for water system improvement projects and the first phase and design work for drilling new wells as part of the city’s Water Supply Alternative Project.
Following the council decision to authorize the bond issuance during the May 7 council meeting, staff said pricing and interest rates for the bonds will be established on May 20 or May 21 with the goal of having the city receive the bond proceeds on June 4.
“This is similar to buying a house. You don’t just get it from your salary, sometimes you have to go into debt and pay it back over time,” Mayor Karla Brown said during the meeting. “But this will be a big shift in this city.”
“We are an old city at 130 years,” she added. “We have a lot of old pipe and we have some changes that are required because of shutting down our three wells, so this is really going to step up the quality of our water distribution, which is extremely important for our residents.”
Over the last couple of years, Pleasanton has been challenged with PFAS contamination in its groundwater wells, aging water system infrastructure and a Water Enterprise Fund that hasn’t been making enough revenue to finance these issues.
The council approved increasing the city’s water rates back in November in order to replenish the water fund over time but there is a financial need to replace the old water pipes throughout the city and pay for the design work to drill testing wells to determine if building new wells in west Pleasanton in order to replenish the city’s water supply is still too much for the water fund to handle.
That’s why on March 5, the city declared its intent to reimburse money spent on near-term improvements to Pleasanton’s water infrastructure through debt financing in the form of a revenue bond sale.
City Finance Director Susan Hsieh said the money bonds will be sold via a negotiated sale to Siebert Williams Shank & Co., LLC — an independent non-bank financial services firm. She said the interest rate is expected to not exceed 6% and the bonds will have a projected true interest cost of 4.10%.
Hsieh said the estimated cost to issue the bond sale is $233,000, the estimated annual debt service payment will be $1.1 million and the total debt service payments are estimated to be $33.4 million over the next 30 years, which is how long the repayment plan will last. However, she pointed out that these numbers could change.
“Please note that these are estimates and actual numbers may change when we sell the bonds,” Hsieh said.
Vice Mayor Julie Testa made sure to point out the fact that contrary to the Pleasanton Unified School District’s infrastructure bonds — which have residents pay off the bonds through property taxes — these water revenue bonds will be paid off by the city’s Water Enterprise Fund.
“It’s not going to be on their property taxes,” Testa said.
Councilmember Valerie Arkin also reiterated that point that the $1.1 million a year for 30 years will not be paid by Pleasanton taxpayers, but rather the net revenues from the water fund.
Those net revenues will come from the increased water rates that the council approved last year, according to staff.
However, as Councilmember Jack Balch pointed out, the city will be conducting water rate studies every two years and will possibly have to raise its water rates each time in order to be able to pay off any new debt in the future.
“We are going to proceed forward with looking at our water rates every two years and if we need additional capital, that debt service for any additional capital debt will require rates to increase,” Balch said. “Any future plans — those two or three new wells, working with Zone 7 (Water Agency), PFAS treatment plant — all of that funding, all of those solutions are not in this today.”
Interesting comments by Julie Testa and Valerie Arkin that the bonds won’t be paid back by the taxpayers, yet we taxpayers are the very ones who are paying higher water rates to the water enterprise fund. That fund is paying back the bonds. So in reality Pleasanton taxpayers and residents are paying back the bonds. A bit of smoke and mirrors by those two council members.