When it comes to paying off the $100 million-plus wastewater treatment plant, the City of Hollister gets an A-plus. And a recent upgrade leading to that credit rating could result in lower monthly rates on residents’ sewer bills.
That A-plus credit rating is for the sewer bonds that financed the wastewater plant nine years ago. It was an upgrade from the prior triple B-minus rating from Standard & Poor, said Brett Miller, the city’s top finance official.
It means the rating agency is giving the city better credit marks in its ability to pay off the initial $120 million in sewer bonds, largely because the city has been paying down its debt ahead of schedule.
The City of Hollister recently refinanced and sold the remaining $68 million in bonds, with 21 years left for the repayment, on a municipal market. With the refinancing, annual payments for the city will drop from $6.7 million to $5 million, or by 25 percent, according to an email from Miller to city officials that he later provided to the Free Lance.
Miller in the email said the city was able to pay off $25 million early with available cash. The new borrowing cost is 3.17 percent compared with average interest rates of 5 percent on prior bond issues, he wrote.
“The total debt amount is also lower because the City used some cash on hand and old bond reserves to pay off a portion of the old bonds,” he wrote.
Miller confirmed to the Free Lance that the finance department plans to bring a proposal to the council soon for a possible decrease in the $86 monthly sewer bill charged to property owners.
Mayor Ignacio Velazquez said in response to the news said it was part of broader efforts to “aggressively” address debt. City officials in recent years have paid off early debt in other areas as well, such as liability on pension side funds and related to the former redevelopment agency, Velazquez pointed out.
“This is what we’ve been working on,” he said.
