The City Council this week took one of the first steps to issuing and refinancing tens of millions of revenue bonds for Glendale Water & Power, which officials say needs more resources to complete deferred capital improvements.
The city plans to issue $35 million in water bonds amid a “dire” financial situation in order to improve pipes, valves, wells and water mains.
“We’re concentrated on what I call the backbone of the system, which is primarily the distribution system,” Steve Zurn, general manager of Glendale Water & Power, said at a City Hall meeting.
It is a change from years past, when the utility focused on capacity projects, such as improving reservoirs, said City Manager Scott Ochoa.
Much of Glendale’s pipes were installed in the 1940s. Over the past year, utility officials have presented photos of corroded pipes to underline the need for improvements.
Three council members approved hiring bond advisors and counsel for the water bond issuance, with Mayor Frank Quintero and Councilman Rafi Manoukian rejecting it. Both have opposed issuing debt in the past.
Although the council approved hiring the advisors, it will take another vote before the debt can be issued around the end of the year. If it is, capital improvement projects would begin in mid-to-late January, Zurn said.
Even though the city increased and restructured water rates, which affect customers differently depending on type and use, the revenue bump isn’t enough to cover needed improvements, officials say.
When the City Council adopted the water rate hikes, the water side of the utility was roughly $21 million in the red. Much of that money was spent on big-budget infrastructure projects. The rate increases are aimed at bringing the water side back into the black.
Utility officials had proposed issuing $60 million in water bonds.
Officials have also proposed issuing tens of millions of dollars in electricity bonds to help cover $88 million in capital improvements over the next five years, but the City Council has yet to review that issue.
Although there was a split vote on the water bonds, the council unanimously approved hiring bond advisors to refinance $24 million in electric bonds from 2003. Due to low interest rates, the refinancing could save the city $2.8 million, according to a city report.
Finance Director Bob Elliot compared it to refinancing a home mortgage at a lower interest rate, which was billed as an important step in trying to improve Glendale Water & Power’s financial situation.
A final vote on the refinancing will also come later.
Advisors and counsel for both bond issuances will be paid $236,000 through proceeds if they are issued.
The city had also proposed to increase electricity rates by 3% in 2013 and 2014, and then 4% in 2015 and 2016, but that move, as well as most capital improvements, has been put on hold.