May 28, 2009 - Today, Denver Water became the first agency in the state to issue Build America Bonds, a new bond program created by the American Recovery and Reinvestment Act of 2009.
While most government agencies, including Denver Water, traditionally issue tax-exempt bonds, the Build America Bonds are taxable bonds with a 35 percent federal subsidy on interest costs. Denver Water awarded $44 million of Build America Bonds to Wachovia Bank National Association at just over 6 percent interest on a taxable basis. However, because of the federal tax subsidy, Denver Water actually will pay 3.94 percent interest. That amount is less than Denver Water’s outstanding tax-exempt bonds, on which it pays an average of 4.23 percent interest.
The bond will allow Denver Water to pay for capital projects, such as infrastructure improvements, at a lower interest rate than it would if it had issued a tax-exempt bond.
“We are pleased to be able to sell bonds at a very reasonable rate in the current market environment,” said Chips Barry, manager of Denver Water. “For ratepayers, this means we are able to keep costs as low as possible while providing us the funding to improve our system.”
In addition, Standard & Poor’s recently upgraded Denver Water’s credit rating to AAA status, its highest rating, making Denver Water a secure credit risk for investors.