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Press Release
December 14, 2016

OWRB Loan Program Receives AAA Rating; Significant Benefits to Water and Wastewater System Loan Borrowers

After an excellent credit rating and a successful bond sale, the Oklahoma Water Resources Board (OWRB) is ready to continue helping finance water and wastewater infrastructure improvements statewide. On December 7, the OWRB sold $16,435,000 in revenue bonds for its Financial Assistance Loan Program (FAP).

The OWRB's bonds received an “AAA” rating from Standard & Poor’s Rating Service. Citing a number of program and oversight strengths, the report stated, "The long-term rating reflects the strengths of the program...". The report also highlighted the OWRB's management of Oklahoma's Water Infrastructure Credit Enhancement Reserve Fund (WICERF), a fund created by Oklahoma citizens’ through passage of SQ 764 in November 2012. SQ 764 authorized the OWRB to issue up to $300 million of state general obligation bonds to help meet the projected multi-billion dollar need of Oklahoma’s water-related infrastructure.

“This rating directly affects our borrowers in a positive way,” said Joe Freeman, chief of the OWRB’s Financial Assistance Division. “Because we can provide loans to Oklahoma communities and rural water districts at lower interest rates than conventional financing sources, it helps them keep their water and sewer rates lower. We're also pleased to announce that adjustments to the program will give our borrower's much greater flexibility in meeting the program's local reserve fund requirements.”

The OWRB’s Financial Assistance Division's FAP is the longest-running, and one of the most cost-effective, financial programs available to municipalities and other water systems. Since the FAP's inception in 1985, the OWRB has approved 371 loans totaling over $976 million to assist communities and other water systems in providing safe and reliable water resources to their customers.

“For over 30 years, the OWRB’s financial programs have benefitted Oklahoma water users by providing water districts and communities with a stable resource for financing water and wastewater projects,” said OWRB's interim Executive Director Julie Cunningham. “We take our commitment to serving Oklahoma’s water needs very seriously, and the funds generated by these bonds are critically important to that mission. I want to also commend our Financial Assistance Division staff for conducting these vital programs with exceptional financial management practices.”

Specifically, the revenue bond proceeds will be used to make low-interest loans to eligible entities such as municipalities, public works authorities, and rural water districts. The loans may be used for any project related to drinking water, sewer system improvements and source water protection, or refinancing of existing debt obligations incurred by communities or other water systems for projects such as: water supply reservoirs, water rights and storage rights acquisition, water supply treatment, distribution, and storage, land acquisition, water treatment systems, wastewater collection, treatment and disposal or recycling to name a few.

In addition to a successful bond sale and exceptional credit rating, new provisions in FAP will give borrowers much greater flexibility regarding the program's Local Reserve Fund requirement. Previous provisions required borrowers to establish a reserve that could be set aside from the borrower's loan proceeds in a cash reserve. Typically, a borrower would reinvest these funds to assist in paying the interest on the loan amount. Due to all-time low reinvestment rates, this requirement had caused demand for FAP financing to wane in recent years.

To update the program's flexibility, the OWRB adopted new rules that allow borrowers to satisfy the Local Reserve Fund Requirement by maintaining a rating of "A-" or higher; by maintaining a debt coverage ratio of at least 1.40; or by maintaining a Surety Policy from a qualified bond insurer with a rating of "AA" or higher in an amount not less than the Cash Reserve Requirement.

Based on discussions with Standard & Poor's and other important stakeholders, it is believed that future FAP Bonds issued with the proposed modifications to the Local Reserve Fund requirement will be rated the same as outstanding FAP Bonds (i.e. "AAA").

In addition to the FAP, the OWRB also administers two other water-related loan programs—the Clean Water and Drinking Water State Revolving Fund programs. In February 2014, Standard & Poor’s, Moody's Investor Service, and Fitch Ratings reaffirmed the AAA rating on those programs as well. The OWRB remains the only entity in Oklahoma to hold an AAA rating from all three major ratings services.

As of December 5, 2016, the OWRB has approved nearly 2,100 loans and grants totaling over $3.55 billion at a savings to Oklahoma communities of an estimated $1.2 billion over conventional financing options.


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