On December 21, the City of McPherson officially approved the bonds to help finance the BPU’s development of the South Well-field. Review the project details from the December 2019 press release here.

Although the BPU had originally planned to wait until 2022 to finance the project, it was ultimately decided to proceed this year to take advantage of the incredibly low interest rates.

“We started looking at it earlier than anticipated because of low interest rates,” said Tim Maier, general manager of the BPU. “We had a financial adviser do an evaluation. Given the historic low interest rates he feels like is prudent to move forward with the financing.”

The financing of the project will be completed in January 2021, with most of the construction taking place in 2022.

“The average annual interest rate received of 2.05% will allow the utility to save $420,000 a year over what the early engineering estimate was in 2019,” Maier said.  According to the BPU’s financial advisor, timing of the bond sale could not have been better since rates received were the lowest seen in his 31-year career.

The $27.62 million project will be financed over a 30-year period.

“This should set McPherson up, from a water supply perspective, for the next 50 to 100 years,” Maier said. I understand this is a significant investment for the community; however, having a long-term water supply is extremely important”, stated Maier.

The utility also took advantage of the interest rate environment by refinance outstanding water bonds which will result in savings of $600,00 over the next seven years. By combining the new money with  the refinancing, another $60,000 in bond issuance costs savings were realized.

To cover the annual bond payments for the project, the Board approved three 8% water rate adjustments effective January 2021, 2022, 2023.  In total the utility will have raised rates 39% over 4 years to fund the project, which is 9% less than originally estimated.