WHEELING - What a difference 24 hours can make.
By waiting a day to sell bonds to pay for a brand new water treatment plant, Wheeling saved about $1.37 million in future interest costs, City Manager Robert Herron told council members Tuesday. The savings mean an additional $39,500 each year that he said can be reinvested in the water system - which has been showing its age of late with frequent line breaks keeping city crews busy well past the colder months when such events are expected.
On May 14, the overall interest rate would have been slightly higher than the 4-percent threshold the city was looking for, so officials decided to wait a day. That patience paid off, as Wheeling sold its bonds on May 15 at a 3.919-percent interest rate.
Photo by Ian Hicks
Wheeling City Manager Robert Herron, left, and Mayor Andy McKenzie confer prior to Tuesday’s City Council meeting.
As a 53.1-percent water rate increase enacted to fund the project goes into effect, Wheeling water customers can expect to pay $66,634,348 over the next 30 years to retire the $39,321,380 in revenue bonds sold last week. But had that sale taken place a day earlier as planned, total debt service would have topped $68 million, Herron said.
Waiting a day meant some risk the market would have moved in the opposite direction, but a solid "A" rating on the bond issue from Standard & Poor's gave the city confidence it could do better. An A rating indicates a "strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances," according to Standard & Poor's.
AAA is the highest possible rating while D is the lowest. Ratings of BBB or higher are considered investment grade.
Wheeling achieved AA ratings on past bond issues, but Mayor Andy McKenzie - who works full-time as a financial adviser - said the bond market changed dramatically when the nation's economy collapsed in 2008. Few AAA and AA ratings are issued today, he said, because too many investors "got burned" when the economy turned sour.
"Prior to the collapse in 2008, you could buy bond insurance. ... It's almost impossible to buy bond insurance now. You have to be able to stand on your own," Herron added.
Construction on the new water treatment plant in Warwood is expected to begin late this summer and likely will take at least two years to complete. It will be located near the current 90-year-old facility, which will be demolished as part of Dayton, Ohio-based Shook Construction's contract with the city.
In other business during Tuesday's meeting, council members voted unanimously to ask the West Virginia Municipal Home Rule Board for permission to enact a 0.5-percent sales tax within city limits. The move, coupled with a proposed reduction in business and occupation tax on retail businesses and elimination of it entirely on manufacturing firms, is expected to generate a net $1.4 million in additional revenue to pay for infrastructure needs and improvements at WesBanco Arena.
If the home rule board gives its approval, council then would have to pass an ordinance actually enacting the sales tax and hold a second public hearing on the proposal.
And in another unanimous decision, council approved the transfer of $300,000 in Tax Increment Financing money to the city's development arm, the Ohio Valley Area Development Corp. That money will go toward the Regional Economic Development Partnership's $3 million build-out at the Stone Center downtown, where Wheeling Jesuit University plans to move its physical therapy program in the fall.