The city of El Paso, Texas, sold more than $170 million in bonds to finance improvements to its water and sewer system.
The issuance comes as the city looks to upgrade its aging water infrastructure. The bonds will also finance a refund of $40 million in existing debt.
The city’s plan includes “rehabilitation of virtually all of the system’s wastewater treatment plants over the next five fiscal years,” a program which will require “significant near-term spending,” according to Fitch Ratings.
While some of the city’s water infrastructure dates back to the 1920s, including one of its primary wastewater treatment plants, El Paso has made strides to upgrade its water and sewer system in recent years. In the past year alone, it began 15 construction projects to improve its water infrastructure, according to the city’s water utility. Bond issuances will help finance that construction.
The bonds sold this week received a rating of AA+ from S&P Global Ratings and Fitch Ratings. They mature between 2024 and 2034, with yields between 2.51% and 3.14%. The bonds maturing in 2024 have the highest yield.
Municipal bonds typically have higher yields as they age. The high yield on the bonds maturing next year could reflect the effect on the ongoing debate over the debt ceiling on the municipal bond market.
The Treasury Department has warned that the United States risks default if Congress does not reach an agreement to raise or suspend the debt ceiling by June 1, the earliest date that it anticipates it could run out of money to pay its bills. As that date approaches, investors have demanded higher interest rates and yields on securities maturing next year.
Stifel, Nicolaus and Company Inc served as lead underwriter on the issuance, purchasing the bonds for $190 million. The price reflected a premium of $20 million.