Bonds to Pay for Upgrading of Waterworks

The City Council has approved the sale of $11.5 million in municipal bonds to help finance improvements to the city’s water system.

City Manager William A. Huston said the sale is the first of three bond issues planned over the next 10 years to pay for a $30-million program to renovate and expand city water wells and reservoirs.

Huston said the debt, including the $11.5-million offering, will be paid off from water revenues. Last September, the council adjusted water rates for each of the next three years.

Finance Director Ronald Nault said that among the immediate water system improvement projects are expansion of the Main Street water reservoir and renovation of the Rollings reservoir and the desalination plant on Main Street.

He said part of the proceeds will also be used to refund $3.8 million of the 1983 water bonds, repay a $1.3-million loan to the Orange County Water District and create a reserve fund of $1.06 million.

The council’s action also authorized the city staff and the bond adviser to advertise the bond sale in publications and to deliver official statements to potential buyers.

The official statement is a disclosure and marketing document, said Lora J. Stovall of the San Francisco-based financial consultant firm Bartle Wells Associates, which the city has hired as bond adviser.

The bonds will be sold by competitive bidding, rather than through the usual practice of picking an underwriter and then negotiating the interest rates, according to Stovall.

She said the bond issue is of “moderate size” at $11.5 million and the company believes that competitive bidding will get the city a lower interest rate and other savings.

The bids will be opened at 11 a.m. April 5. Also on that date, the council will formally award the bond to the lowest bidder.

Stovall said the current market for municipal bonds is “good” and that she is confident the city will easily find an underwriter.