Allentown Water/Sewer System Lease: A Good Deal for All?

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CASE STUDY– WIFIA FINANCING OF A

P3 LIKE INFRASTRUCTURE PROJECT

P-3 Connect:

Defining the Future of P3 in the US

July 29, 2014

Aurel Arndt

Chief Executive Officer

Lehigh County Authority

LEHIGH COUNTY AUTHORITY / CITY OF ALLENTOWN

CONCESSION LEASE

• A Public to Public Partnership (P2P)

LEHIGH COUNTY AUTHORITY / CITY OF ALLENTOWN

CONCESSION LEASE

What is it?

• A 50-year lease of the Allentown

Water and Wastewater systems

LEHIGH COUNTY AUTHORITY / CITY OF ALLENTOWN

CONCESSION LEASE

CITY OF ALLENTOWN

$211.8 Million

System Lease

Nominal Owner

WATER & SEWER

SYSTEMS

Operations,

Maintenance,

Capital

Improvements

LEHIGH COUNTY AUTHORITY

Compliance

Office

City Water & Sewer

System Revenues

City Oversight

CONCESSION FINANCING

Sources and Uses of Funds

SOURCES:

2013 Bonds (Net of OID)

USES:

Up front Lease Payment

Capital Improvement Fund

TOTAL

$ 296,760,141

$ 211,332,217

$ 31,850,565

Debt Service Reserve Fund

Capitalization Interest Account

$ 28,090,273

$ 3,450,000

Operations and Maintenance Reserve Fund $ 9,199,515

Major Maintenance Reserve Fund $ 7,500,000

Cost of Issuance $ 5,337,569

TOTAL: $ 296,760,141

CONCESSION FINANCING

Overview – Bonds sold July 31, 2013

Three Series - $307,684,000

$ 245,590,000 – 2013 A Bonds – Fixed Rate Bonds

$ 43,359,000 – 2013 B Bonds – Capital Appreciation Bonds

$ 18,735,000 – 2013 C Bonds – Taxable Bonds

Series A & B Summary only

Average Life – 28.7 years

Yield – 5.4486%

CONCESSION FINANCING

Series 2013A - $245,590,000

MATURITY PRINCIPAL AMOUNT YIELD %

2038 $ 14,265,000 5.180

2043

2047

$132,335,000

$ 98,990,000

5.280

5.450

Series 2013B - $ 43,359,000

Series 2013C - $ 18,735,000

MATURITY PRINCIPAL AMOUNT YIELD %

2019-2038 $368,001-$3,454,285 3.21-6.21

MATURITY PRINCIPAL AMOUNT YIELD %

2018 $ 18,735,000 3.440

CONCESSION FINANCING

Other Market Rates (July 31, 2013)

30-yr Treasury Bond – 3.64%

HYPOTEHTICAL WIFIA FINANCING

Finance Immediate Capital Improvements $ 31,850,000

Assume 30-year life (or longer)

WIFIA Annual Interest Costs:

49% of $ 31,850,000 at 3.64% = $ 568,077

Replacing

2013 A Bonds Annual Interest Cost

49% of $ 31,850,000 at 5.28% = $ 824,023

Annual Savings $ 255,946 (31%)

HYPOTEHTICAL WIFIA FINANCING

Other WIFIA Possibilities a. Replace 2013B Series Bonds 2038 Maturity - 6.21%

• Annual Savings $27,644 (61%) b. Include Portion (10.35%) of Debt Service Revenue Fund

• Annual Savings $23,363 (31%) c. Increase WIFIA Funding of Capital Improvement Cost to 80%

• Annual Savings $161,925 (31%) d. Include portion (10.35%) of Issuance Costs

• Annual Savings $4,439 (31%)

Total Enhanced Annual Savings: $ 217,371 (35%)

THANK YOU

• Questions…

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