The city of Ann Arbor, Michigan, sold $40 million worth of bonds to make improvements to the city’s water supply system.
The bonds mature between 2025 and 2053, yielding between 2.75% and 4.25%. The bonds received a rating of AA from S&P Global Ratings.
The bonds are being issued for the purpose of “defraying the cost of acquiring and constructing extensions and improvements to the city’s water supply system (the ‘system’), to fund a reserve fund, if necessary, and paying the cost of issuing the bonds,” according to the official statement accompanying the sale of the bonds.
The issuance is Ann Arbor’s second largest of the past two decades. It comes amid falling water usage in the city, which could diminish revenue for the system. In 2022, the city consumed almost 4.2 billion gallons of water, about 15% less than it did a decade prior.
The bonds will be backed by revenue from the water supply system, which generated almost $30 million last year and has an additional $30 million in water revenue bonds outstanding. Almost a quarter of that revenue came from the University of Michigan. The bonds are not general obligations of the city of Ann Arbor or the state of Michigan.
Jefferies LLC served as underwriter on the issuance, purchasing the bonds at close to par.