Truckee Meadows Water Authority (TMWA) has literally saved tens of millions of dollars since its inception by remaining vigilant and nimble in the management of its long-term debt. The bulk of TMWA’s debt came in 2001, when the City of Reno, City of Sparks and Washoe County (RSW) partnered to purchase the water utility from Sierra Pacific Power Company (Sierra) for $354M.
In September of 2000, Sierra announced it would sell its water business, ending over a century in which the company or its direct predecessors operated both power and water in our community. Local leaders faced the possibility of our region’s primary water provider being sold to an out-of-state company. This wouldn’t necessarily be a bad thing, but they judged water to be too essential for our community to leave it to chance.
In October of 2000, RSW submitted a joint proposal to purchase the water utility from Sierra. Shortly after, Truckee Meadows Water Authority (TMWA) was born.
Savings purchase the utility, over $452M in revenue-backed bonds were sold—$354M to purchase the water and hydroelectric assets from Sierra with the remainder used for improvements on the water system, capital reserves, staffing and operational costs (insurance, office space, computers, desks, etc.). TMWA was literally starting from scratch and a lot needed to be done in a very short time.
“The 2001 Bonds were basically the mortgage on the house,” said Michelle Sullivan, TMWA Chief Financial Officer. “TMWA has taken on additional debt since its inception—rising to a peak of a little over $556M in 2008—but that first bond issuance has always represented the bulk of what we’ve had to manage. When you’re dealing with hundreds of millions of dollars in debt, Interest rates can make a profound cost difference over the life of a loan or, in TMWA’s case, the period before a bond series matures and must be repaid.
Savings finance team has always been very proactive in finding opportunities to refund older bond series by issuing newer ones at a lower interest rate,” Sullivan said. “By doing this, we’ve lowered our cost-of-debt obligation by well over $50M since TMWA was founded.”
Since 2015, TMWA’s long-term debt has been reduced by over $76M. This has been largely due to the premiums TMWA has earned on its lower-interest bond reissuances.
“Though were a public agency, from day one, TMWA has prided itself on operating like a business,” Sullivan said. “The way we manage our bond debt is a prime example of this. Our Debt Management Policy requires that we realize at least three percent savings before we can do a refunding. We’ve almost always done better than that. The bottom line for our customers is that lower interest rates mean lower cost of operations which, in turn, can help keep water rates as low as possible.”